Report finds mortgage discrimination
WASHINGTON — Applicants for home mortgages were turned down for loans at a slightly higher rate in 2006 than the previous year and significant disparities continued to exist between white applicants and minority applicants, the government reported Wednesday.
In its annual look at mortgage practices among the nation’s lending institutions, government regulators found the denial rate for all home loans was 29 percent last year, up from 27 percent in 2005.
The report, released by the Federal Reserve and other regulators, found minorities received loans with higher interest rates or other increased charges in greater percentages than white applicants.
Controlling for various factors, the report found 30.3 percent of the loans for home purchases by African-Americans were higher-cost loans compared with 17.7 percent of loans for whites.
The gap of 12.6 percentage points in the number of African-Americans getting such high-cost loans compared with whites was higher than a 10 percentage point gap found in the 2005 survey.
Advocacy groups said the new report, the most comprehensive look at mortgage practices done each year, showed discrimination was continuing and that these problems were contributing to the current crisis in subprime lending, where a growing number of families are losing their homes due to rising foreclosure rates.
The government data showed there was an increasing use of “piggyback” mortgages in 2006 in which strapped borrowers obtained a second mortgage to cover the cost of the home they were purchasing because they could not afford a larger down payment.
The survey found 22 percent of home purchase loans in 2006 involved piggyback loans, an increase from the levels in 2004 and 2005.
“Irresponsible lending practices have placed working families, minorities and more recently an increasing number of middle-income borrowers at risk of losing their homes,” said John Taylor, president of the National Community Reinvestment Coalition, a nonprofit group that promotes equal access to credit and financial services.
“In the housing boom of recent years, lenders layered risk upon risk in a rush to outperform their peers,” Taylor said. “Not only are individual consumers harmed … but also the contagion effects from the current foreclosure crisis are spreading into many other aspects of the economy.”
Officials at the coalition said their analysis of the new mortgage data showed that areas of the country with the worst delinquency problems were in the Midwest, especially Ohio, Indiana and Michigan, the south Atlantic region, the Gulf Coast and portions of Texas, Oklahoma and Colorado.
Treasury Secretary Henry Paulson and other Bush administration officials met with large mortgage companies on Wednesday to try to coordinate a response to rising mortgage delinquencies that have already set off shock waves in global financial markets. Estimates are that 2 million Americans will face sharply higher mortgage payments over the next two years as their adjustable rate mortgages, obtained with low introductory rates, reset to much higher rates.
Taylor said his group was pushing for Congress to enact an anti-predatory lending bill that would impose uniform standards across the country.
The new mortgage data, which has been released since 1975, is required under the Home Mortgage Disclosure Act, which directs most mortgage lending institutions with offices in metropolitan areas to make the information available to regulators.
The data is compiled by the Federal Financial Institutions Examination Council, which is made up of the Federal Reserve, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Department of Housing and Urban Development.