Blacks, Latinos pay more for mortgages

[Alonzo]

CHARLOTTE, N.C. - Black and Hispanic home buyers are more likely to pay high mortgage rates than white borrowers with similar credit ratings and income levels, an advocacy group found.

The Center for Responsible Lending said either loan sellers are charging higher rates to the minority customers or those borrowers are being steered to loan sellers that specialize in higher rates.

Using an industry database, the Durham-based nonprofit center compared credit scores, down payments and other financial information on about 177,000 loans made in 2004 by "subprime" lenders — companies that charge higher interest rates than banks. The lenders provided the borrowers' income and race.

The study, released Wednesday, found that blacks were 29 percent more likely to pay a high interest rate on a fixed-rate home purchase loan. A Hispanic borrower also was more likely to pay a high rate, it found.

"African Americans and Latinos are paying a premium for home loans because of the color of their skin," said Hilary Shelton, director of the NAACP's Washington bureau.

The Federal Reserve Board said last fall it had identified about 200 lenders whose records showed possible discrimination. Regulators said they would look more closely at those lenders.

The center's data did not include all the factors used by lenders, such as a borrower's total debts, making the study's conclusions incomplete, said Doug Duncan of the Mortgage Bankers Association. He also questioned the ability of any national study to prove discrimination, which would require an analysis of specific lenders.

The Charlotte Observer reported in August that blacks who borrowed from 25 of the nation's largest lenders were four times more likely than whites to pay high rates. Even blacks with incomes above $100,000 a year were charged high rates more often than whites with incomes below $40,000, the newspaper found.

http://www.msnbc.msn.com/id/13081865/

[Labrocca]

This imho is why the government, agencies, or any form should never ask for race/color. I don't see the point of the question and how it helps anyone in a decision making process. It should be based on credit period.

[PittsburghAfterDark]

There's one thing this article fails to mention that is key above all else.

How well the consumers shopped for mortgages.

Banks and financial institutions typically count on X amount of people who have their "free" checking account applying with them for a car loan, mortgage, student loan etc. Free checking isn't free and if you open up several financial relationships with a bank they more than make their money back from anything they lose on your checking being free.

How many of these people used a service like Lending Tree? How many really looked at interest rates? More often than not people don't care what the interest payment is as long as the monthly payment is in line with what they want.

I'll use this as an example. I went car shopping with a GF 2 years ago. Now at one point I had extensive dealings with car dealerships and knew the business inside and out. So, she took me. Here was the sale; "I want to pay $280 a month.". Done.

What did she leave on the table? She signed over a $2,000 rebate from Ford to the dealership. She signed a 5 year deal. The reality is I could have taken the cash rebate, put it on the down payment, gotten her something other than window sticker price and probably had her on 4 years for the same amount.

She opened her mouth and took all my negotiating ability away from me.

Given the state of financial education in this country think about it. How many blacks or Latinos have generations of home ownership and family financial advice and experience to draw from?

The results of this study are not limited by credit scores only. There are more ways to finance a house than you can possibly imagine. For example: If you possess significant shares of stock and don't intend on selling it soon? You can use that as collateral to lower your mortgage rates significantly as the bank has a percentage of the mortgage guaranteed by something other than your signature and credit.

I could list 10 other ways off the top of my head but the only two ways people seem to know how to mortgage their homes these days are 30 year fixed rates and interest only LIBOR loans.

However if you're not educated on these market instruments you'll pay a higher rate. That has absolutely nothing to do with income or credit rating and that's where these "race" based studies that indicate "redlining" in one form or another are completely missing the boat.

[Alonzo]

The study did say it didn't measure everything. Though, as for your car example, there was an actual study done on that. They sent in different people (of differing races and gender) with the same background story, same finances, education, dress etc. and told them all what to say and when to accept the offer. They found significant differences in what the car price was.

[bobbylien]

The study did say it didn't measure everything. Though, as for your car example, there was an actual study done on that. They sent in different people (of differing races and gender) with the same background story, same finances, education, dress etc. and told them all what to say and when to accept the offer. They found significant differences in what the car price was.

Thats probably because the dealerships were trying to get every cent they could and thought the people of lesser education and stuff wouldnt give it a second though. Its bad business, but that doesn't mean every salesman and dealership works that way.

[Alonzo]

They all had the same education, the study was designed that way. Skin color and gender was the only difference, anything else was assumed by the dealer.

[bobbylien]

They all had the same education, the study was designed that way. Skin color and gender was the only difference, anything else was assumed by the dealer.

oops, I read your comment wrong.

[penmyst]

I personally never see race or sex as the most important factor in negotiations. It's knowledge and patience.

Those are the two biggest keys to getting yourself a good deal.

They are also two areas where many minorities are lacking in the financial fields.

This isn't to say they are dumb. It's to say they are ignorant.

Ignorance isn't just a minority thing. Many white males can be just as ignorant and will be taken advantage of just as easily.

[Nathan Brazil]

They all had the same education, the study was designed that way. Skin color and gender was the only difference, anything else was assumed by the dealer.


There's other factors. Location of home? Did the study compare the loans granted to equally qualified whites the same neighborhood? It doesn't say. That's factor.

Did the study compare loans of the same value granted to whites with comparable job histories and credit scores from the same lenders? No.

Now, if one does a simple geographical study of lending rates, I'm sure that the rates in South Central LA are going to be higher than in Palos Verdes in the South Bay, simply because the risk to the lender of default is greater, as well as the risk of getting the place burned down in a riot, which insurance won't cover. Again, a relevant factor.

But, as most people are aware, bankers don't have souls, and the only color they really care about it green. If we pretend the flawed study is valid and there is discrimination in lending, the big question is why? It's either because the lender sees a tangibly greater risk in the loan, or the applicant hasn't shopped around enough. No one forces anyone to take an uncompetitive loan, they do that on their own. It's neither fraudulent nor criminal to offer a higher rate to one person than another. It's called business.

These people that feel there's discrimination happening want a law passed to curtail someone's freedom. All they need to do is educate the loan applicants, and any deceptive or shady practices will fade before the rise of more savvy shoppers.

[Alonzo]

The study you quoted was a car one, different from the one linked. That one was set up by the people running it so that everyone was equal in every way.

While some of the points you make about the mortgage one are valid (and mentioned in the article), you seem to go a step beyond that. Are you suggesting that there isn't discrimination in society at all?

[Labrocca]

The study did say it didn't measure everything. Though, as for your car example, there was an actual study done on that. They sent in different people (of differing races and gender) with the same background story, same finances, education, dress etc. and told them all what to say and when to accept the offer. They found significant differences in what the car price was.Â*Â*


I don't trust this study as a salesman I know that if there is a lot of interest in a car I might want to ask more. Also were they all dressed the same? They couldn't all be the exact same person except for color..that's impossible. I ain't discounting what you are saying just that I wouldn't trust a study like that. Too many variables that are not controllable.

As for mortgages and education...good post PAD. It reminds me of my mother-in-law (Jamaican). She came from an incredibly poor background. She does well enough from her hard work but financially she is a moron. She had a mortgage she got a couple years ago without talking to me first...It was interest only mortgage that cost her $14,000 when she sold her home. It was a terrible deal and she knew it only AFTER she signed and went for it. She sadly trusted the salesman about how great the deal was. The salesman was a black too. I guess she trusted him more because of it. Then she also got a local black owned Realtor to sell her home. He totally ripped her off for a percentage and was terrible with his service. Again..she took what he said at face value.

I tell her now to consult me (she still doesn't listen though) and never ever ever take what a salesman says at face value.

Anyways I hope my story didn't derail this thread.

I think PAD's point of financial education and experience has merit.

[Alonzo]

I don't trust this study as a salesman I know that if there is a lot of interest in a car I might want to ask more. Also were they all dressed the same? They couldn't all be the exact same person except for color..that's impossible. I ain't discounting what you are saying just that I wouldn't trust a study like that. Too many variables that are not controllable.


It was as close as possible. It was a sociological experiment. The researchers did everything they could to make the only difference sex and race. They did not try to figure out the results from ordinary people after the fact. They took the people (black female, black male, white female, white male) and made they as close as possible, barring race and gender, and then sent them to the dealership.

I think what needs to be understood though is that while, yes, there probably are some clearly racist people holding these jobs, the vast majority of it is unintentional. The people are intentionally basing their decision on race and gender, it simply goes into how they percieve the person.

A lot of modern day bigotry is that type. The people behaving that way aren't really aware of it, it's more subtle. But that doesn't mean it doesn't have an effect.

[Labrocca]

I don't trust this study as a salesman I know that if there is a lot of interest in a car I might want to ask more. Also were they all dressed the same? They couldn't all be the exact same person except for color..that's impossible. I ain't discounting what you are saying just that I wouldn't trust a study like that. Too many variables that are not controllable.


It was as close as possible. It was a sociological experiment. The researchers did everything they could to make the only difference sex and race. They did not try to figure out the results from ordinary people after the fact. They took the people (black female, black male, white female, white male) and made they as close as possible, barring race and gender, and then sent them to the dealership.

I think what needs to be understood though is that while, yes, there probably are some clearly racist people holding these jobs, the vast majority of it is unintentional. The people are intentionally basing their decision on race and gender, it simply goes into how they percieve the person.

A lot of modern day bigotry is that type. The people behaving that way aren't really aware of it, it's more subtle. But that doesn't mean it doesn't have an effect.



Good comeback...I can't really disagree with your statement.

[Nathan Brazil]

Are you suggesting that there isn't discrimination in society at all?


What difference if there is? Everyone discriminates, every day. It's not the government's role to regulate what private citizens do.

Discrimination based on race, religion, and all that other crap cannot exist in government, because the Constitution requires that all persons receive equal protection under the law. That's it.

If Bob Byrd, lunch counter owner in Selma, Mississippi doesn't want to serve darkies, it's his business. Not yours, not the government's. It's between him and his customers only. If he gets enough people to buy his pork sausages to stay in business, then so be it. Some people will just have to find someone else for their share of pork.

They do seem to manage that somehow.

[Nathan Brazil]

I don't trust this study as a salesman I know that if there is a lot of interest in a car I might want to ask more. Also were they all dressed the same? They couldn't all be the exact same person except for color..that's impossible. I ain't discounting what you are saying just that I wouldn't trust a study like that. Too many variables that are not controllable.


It was as close as possible. It was a sociological experiment. The researchers did everything they could to make the only difference sex and race. They did not try to figure out the results from ordinary people after the fact. They took the people (black female, black male, white female, white male) and made they as close as possible, barring race and gender, and then sent them to the dealership.

I think what needs to be understood though is that while, yes, there probably are some clearly racist people holding these jobs, the vast majority of it is unintentional. The people are intentionally basing their decision on race and gender, it simply goes into how they percieve the person.

A lot of modern day bigotry is that type. The people behaving that way aren't really aware of it, it's more subtle. But that doesn't mean it doesn't have an effect.


Then there was the time we needed new tires. The wife got on the phone and called places, I got on the phone and called places. One place offered me a set of four tires for $75 each, plus $5 for the valves. The wife called the same place, and she was quoted $95 each, plus $15 for each valve.

Needless to say, we're never calling that place again. It's a free market, you can find honest dealers if you look.