[Hpn] ACORN Housing Study Documents "Financial Apartheid" In Mortgage Interest Rates fw Interest Rates fw

Tom Boland wgcp@earthlink.net
Sat, 04 Nov 2000 20:29:52 -0800 (PST)

NOVEMBER 1, 2000 8:00 AM
Jordan Ash (651) 642-9639 or Valerie Coffin (202) 547-2500

Minority and Low Income Homeowners More Likely to Receive High Interest
ACORN Study Documents Problem of Predatory Lending and "Financial Apartheid"
      WASHINGTON - November 1 - The Association of Community Organizations
for Reform Now (ACORN) released a study analyzing 1999 home mortgage
lending data which found that minority and lower income borrowers are much
more likely to receive a higher-cost subprime mortgage when refinancing or
buying a house. Subprime borrowers pay higher rates and fees, and they are
much more likely to be the victims of predatory lending practices which
strip them of the equity in their homes and can even lead to foreclosure.

      The report, "Separate and Unequal: Predatory Lending in America,"
found that nationally in 1999, 45.1% of all conventional refinance loans,
excluding loans for manufactured housing, received by African-Americans
were from subprime lenders, as were 19.5% of the refinance loans received
by Latinos, compared to just 12.1% of the refinance loans received by
whites.  In comparative terms, African-Americans were 3.7 times more likely
to receive a subprime loan, and Latinos were 1.6 times more likely.

      The report also found that the concentration of subprime loans is
greatest among lower income minorities.  Not including loans for
manufactured hosing, two out of every three conventional refinance loans
(61.3 percent) received by low-income African-Americans in 1999 were from
subprime lenders, and more than half (52.6 percent) of the conventional
refinance loans received by moderate-income African-Americans were from
subprime lenders. Almost one in three conventional refinance loans (30.3%)
made to low-income Latinos were subprime.

      "It looks like we still have two separate and very unequal financial
systems.  One for the rich and one for the poor.  One for whites, and one
for everyone else.  The banks created this situation when they abandoned
our neighborhoods and opened the door for the loan sharks.  Now we're
finding that these same banks are profiting from us through their financing
or even ownership of these predatory lenders," said ACORN National
President Maude Hurd.  "We know that many of the people who got subprime
loans could have qualified for a lower cost mortgage, but instead they were
pushed into a higher cost loan because the mortgage company saw an
opportunity to make more money."

      In addition to examining subprime refinance loans, the report
reviewed subprime purchase loans and found that:

      * The rate of growth of subprime purchase loans to minorities has
been substantially faster than the rate of growth of prime loans,
especially since 1995.  The number of subprime purchase loans to
African-American homebuyers has risen 631% from 1995 to 1999, while the
number of prime conventional purchase loans received by African-American
homebuyers in 1999 was actually lower than in 1995.  Subprime purchase
loans increased 509% to Latino homebuyers during this time, while prime
loans rose just 29%.  White homebuyers also saw a larger percentage
increase in subprime loans than in prime loans during this time, although
the difference was not nearly as great - a 285% increase in the number of
subprime loans and a 22.0% increase in the number of prime loans.

      * If we look at only conventional loans and exclude government loans
and loans for manufactured housing, African-American homebuyers were 4.8
times more likely than white homebuyers to receive a subprime loan, and
Latinos were 2.5 times more likely.  In 1999, subprime loans made up 23.1%
of conventional home purchase loans, excluding loans for manufactured
housing, received by African-Americans, and 12.0% of the loans to Latinos,
but just 4.8% of the loans to whites.

      * Minorities Receive a Much Larger Share of Subprime Purchase Loans
Than of Prime Conventional Loans.  In 1999, African-Americans received
13.5% of all the subprime purchase loans made in the United States, a four
times larger share than the 3.5% they received of prime purchase loans. 
Latinos received 8.5% of the subprime loans, almost double their 4.8% share
of prime loans.  In contrast, whites received 49.7% of the subprime
purchase loans, but 75.4% of the prime loans.

      Other findings concerning suprime refinance loans were:

      * The racial disparity is still present when comparing minority
borrowers with white borrowers of the same incomes, and it persists among
higher income borrowers.  30.5% of the refinance loans received by
upper-income African-Americans were from subprime lenders, as were 13.1% of
the refinance loans received by upper-income Latinos.  In contrast, only
8.2% of the refinance loans received by upper-income whites were from
subprime lenders.  In addition, upper-income African-Americans were even
more likely than low-income whites to receive a subprime loan when

      * Subprime lenders also target lower income white homeowners. 
Subprime lenders made 24.4% of all conventional refinance loans, excluding
loans for manufactured housing loans, received by low-income white
homeowners, and 18.5% of all refinance loan received by moderate-income
white homeowners.  In contrast, subprime lenders made just 8.2% of the
refinance loans to upper-income white homeowners.

      * From 1993 to 1999, the rate of growth in the number of subprime
refinance loans to minorities was larger than the growth to whites. The
number of subprime refinance loans has risen 959% to African-American
homeowners, 695% to Latino homeowners, and 569% to white homeowners, almost
half of the African-American increase.

      ACORN is calling for changes including: adherence to a 'code of
conduct' pledging an end to deceptive and predatory practices on the part
of subprime lenders; increased outreach and lending from traditional "A"
lenders; stronger state, federal, and local legislation to protect
consumers from abusive practices; and the aggressive investigation and
prosecution of predatory lenders.



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