| 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 refinancing.
• 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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