Washington – Higher income does not protect blacks and Hispanics from receiving mortgage loans with above-market rates, a new study by a group pushing for reforms to lending laws says.
The report, released Tuesday by the Washington-based National Community Reinvestment Coalition, concludes that in 2005 blacks in 171 metropolitan areas were at least twice as likely as whites to receive expensive loans.
The study was based on an analysis of nationwide mortgage data collected by the Federal Reserve for the most recent year available.
The report, which analyzed 2.3 million loans in 380 metro areas, also concluded that while the disparity between blacks and whites existed at all income levels, it was more severe at higher income levels rather than lower ones.
The study found that middle-class and upper-income blacks in 167 metropolitan areas were at least twice as likely as whites with similar incomes to receive loans with high rates. By comparison, there were 70 metropolitan areas where low-income blacks faced a similar likelihood of receiving above-market rates.
The NCRC report found similar trends among Hispanics. Middle-class and upper-income Hispanics in 75 metro areas were at least twice as likely as whites with comparable incomes to sign up for high-cost loans, compared with 10 metro areas for low-income Hispanics.
The Mortgage Bankers Association criticized the report, saying it focuses on race instead of factors that lenders consider when deciding whether to make loans, such as borrowers’ debt levels and the amount they can provide as a down payment.
“This study ignores these other important credit variables in order to make a broad generalization and seeks to identify an overly simplistic answer to a much more complex issue,” Jay Brinkmann, the trade group’s vice president of research and economics, said in an e-mailed statement.
The study found the worst disparities in Charleston, S.C.; Bridgeport, Conn.; Omaha; Milwaukee; and Springfield, Mass.
The study comes as ratings agency Standard & Poor’s said Tuesday it is considering cutting the credit rating of more than $12 billion in bonds backed by risky home loans as more borrowers miss payments. These bonds – sold by some of Wall Street’s biggest banks – represent a principal source of financing for the housing market.
