Bias plagues mortgage market, a recent study shows.
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African-Americans and Latinos are 30 percent more likely to receive higher rates for home loans than white borrowers despite similar credit scores and risk factors, according to a study published Wednesday by The Center for Responsible Lending. The Center for Responsible Lending’s study found that African-Americans and Latinos face different levels of pricing disparities when compared with white borrowers. African-Americans were more at risk when the subprime mortgages included a prepayment penalty. African-American borrowers were 31 percent more likely to receive a higher rate on a subprime fixed home mortgage while they were 15 percent to 16 percent more likely to pay more to take out an adjustable rate mortgage. |
African-Americans also faced pricing disparities when it came to refinancing their existing homes. Two-thirds of refinancing loans include prepayment penalties, putting African-Americans at a significant disadvantage to their white counterparts. The study found that lenders tended to offer African-American borrowers 34 percent higher rates on fixed-rate refinance loans and 17 percent higher on ARM refinance loans. The latest study follows in the wake of a Federal Reserve report last September that analyzed 2004 data provided by the Home Mortgage Disclosure Act (HMDA) and highlighted alleged discriminatory practices by around 200 lenders, including 100 banks. The study sparked outrage among minority advocates and propelled increased scrutiny of mortgage lenders by government agencies, such as the Department of Housing and Urban Development.
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