TBO.com - TBO is Tampa Bay Online

Race Gap Seen In Mortgages

ADVERTISEMENT

Bloomberg News

Published: September 13, 2007

Minority borrowers received higher-cost mortgages more frequently than whites when they refinanced their homes last year, continuing a trend of racial disparities in home-loan rates, the Federal Reserve said.

Blacks received high-cost loans 52.8 percent of the time when they refinanced home loans last year, versus 49.3 percent in 2005, the Fed said in a report released Wednesday.

Hispanic borrowers received high-cost refinancings 37.7 percent of the time, up from 33.8 percent in 2005. The rate for white borrowers was 25.7 percent last year, compared with 21 percent in 2005.

'The incidence of higher-priced lending for blacks and Hispanic white borrowers is notably greater than for non-Hispanic whites,' the Fed said in the report. 'Similar patterns are shown in racial and ethnic differences in denial rates.'

The report's release coincides with increased scrutiny in Congress of lending practices that contributed to the collapse of the subprime mortgage market and prompted credit market volatility in recent weeks.

Black homeownership fell nearly 2 percentage points in the first six months of this year to 46.3 percent, compared with a half-percentage point drop for whites, to 75.4 percent.

The report indicated little change in the percentage of minority homeowners who rely on expensive mortgage credit.

Black borrowers had high-cost loans 53.7 percent of the time last year, versus 54.7 percent in 2005.

For Hispanic borrowers, it was 46.6 percent last year versus 46.1 percent in 2005. Those figures weren't adjusted for loan size, borrower's income or geographic location.

'Differences by race and ethnicity remain stubborn, persistent, and significant,' said Josh Silver, a vice president of research and policy at the National Community Reinvestment Coalition in Washington. 'The differences are not narrowing. With all the increased attention, why isn't it?'

The Fed economists writing the study cautioned that credit histories, loan-to-value and debt-to-income ratios may also explain the racial disparities. Their analysis of high-cost loans does not include this information.

'As in past years, the Federal Reserve's report is of limited utility in determining whether there are true disparities because it doesn't have information about credit scores, which are the most significant explanatory variable in loan pricing,' said Andrew Sandler, a partner at Skadden, Arps, Slate, Meagher & Flom in Washington.

Still, regulators have acknowledged that the data are disturbing and point to problems of how credit is distributed in some neighborhoods.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT