March 16, 2007
Mortgage lenders in the Chicago area made more high-cost, subprime home
loans to African-American borrowers than they did to white borrowers, a
survey of lenders in six cities found.
findings come from the report, "Paying More for the American Dream: A
Multistate Analysis of Higher Cost Home Purchase Lending," which
examined the cost of borrowing in New York City; Los Angeles; Chicago;
Boston; Charlotte, N.C., and Rochester, N.Y., from seven lenders:
Citigroup, Countrywide, GMAC, HSBC, JP Morgan Chase, Washington Mutual
and Wells Fargo. This was 2005 federal mortgage lending data that was
released in September 2006.
"This is the first time that we have looked at the distribution of subprime lending," said Tom Feltner of the Woodstock Institute.
"We know that minorities are getting the lion's share of subprime
loans. Our concern is that the disproportionate share will have a
found that African-American borrowers were 3.8 times more likely to
receive a higher-cost home loan than were white borrowers.
Latino borrowers were 3.6 times more likely than white borrowers to receive a higher-cost home loan.
had the highest share of higher-cost home loans to African-American
borrowers than to white borrowers at 64.2 percent, while Boston had the
highest share to Latino borrowers at 54.5 percent.
worst disparity for any individual lending group was observed in
Chicago, where African-American borrowers were 14 times more likely to
receive a higher-cost home purchase loan from Wells Fargo than were
white borrowers (35.3 percent vs. 2.5 percent).
report indicated that concentrations of high interest subprime loans,
such as those in the Chicago area, have a disproportionate impact on
minority neighborhoods and households, said Marva Williams of the
Woodstock Institute, a member of the Consumer Advisory Council. The
council's report was presented recently to the Federal Reserve Board.
bottom line on homeowners and neighborhoods is an increase in defaults
and foreclosures on subprime loans. Other results include crumbling
stock prices of subprime lenders and growing concerns on Wall Street
about underwriting standards in the subprime lending industry, Williams
"These lenders were analyzed because
they are among the biggest financial institutions in the nation, and
all originated a substantial volume of both higher-cost subprime and
lower-cost prime loans," Williams said. Other members of the council
include: the California Reinvestment Coalition, Community Reinvestment
Association of North Carolina, Empire Justice Center, Massachusetts
Affordable Housing Alliance and the Neighborhood Economic Development
The council called on
the Federal Reserve Board to be proactive and investigate systemic and
specific corporate fair lending violations. Here are some of the
highlights of the report:
– For these
seven lenders, the percentage of total home purchase loans to African
Americans that were higher-cost was six times greater than the
percentage of higher-cost home purchase loans to whites in the six
cities (41.1 percent vs. 6.9 percent).
In the same cities, for the same lenders, the percentage of total home
purchase loans to Latinos that were higher-cost was 4.8 times greater
than the percentage of higher-cost home purchase loans to whites (32.8
percent vs. 6.9 percent).
– In each of the
cities examined, the seven lenders combined showed larger African
American/white and Latino/white disparities than those exhibited in the
overall lending market.