Blacks and Hispanics twice as likely to get high-cost mortgages

Posted by: Prashant Gopal on July 31, 2008

A study by the National Community Reinvestment Coalition released today suggests that blacks and Hispanics are much more likely to have risky and poorly-underwritten loans. But interestingly, the disparity is pretty significant even among more wealthy borrowers.


During 2006, middle- and upper-income (MUI) African-Americans were twice or more as likely to receive high-cost loans as MUI whites in 155 of the metro areas analyzed (71.4 percent). Furthermore, MUI Hispanics were twice or more as likely to receive high-cost loans as MUI whites in 45 of the metro areas analyzed (22.5 percent).
In comparison, while low- and moderate-income (LMI) minorities are more likely to receive high-cost loans than LMI whites, the disparity was less significant than disparities among MUI borrowers.

The report goes on to rank the cities with the biggest disparities. They are as follows:

1. Milwaukee-Waukesha-West Allis, WI
2. Minneapolis-St. Paul-Bloomington, MN
3. Huntsville, AL
4. Ann Arbor, MI
5. Hartford-West Hartford-East Hartford, CT
6. Bridgeport-Stamford-Norwalk, CT
7. Greenville, NC
8. Philadelphia, PA
9. Essex County, MA
10. Durham, NC
11. Raleigh-Cary, NC
12. Dayton, OH
13. Birmingham-Hoover, AL
14. Fort Wayne, IN
15. Cleveland-Elyria-Mentor, OH
16. Roanoke, VA
17. Rochester, NY
18. Harrisburg-Carlisle, PA
19. Lubbock, TX
20. Warren-Troy-Farmington Hills, MI

Reader Comments

MattL

August 1, 2008 8:10 AM

Well, with all the mandates over the past 5 years for lenders to make sure they were giving mortgages to minorities, just look where we ended up...it bit them right in the you know what!!

I dont care whether a person is black, white, red or green, if you don't have a steady job, a big cash cushion in the bank, and the intelligence and means to maintain a home, then you are not ready for home ownership!!

There is absolutely NOTHING wrong with renting...in fact, that is what you should be doing right now in this crashing market. I really am beginning to understand that the only reason Paulson is trying SOOOO hard to keep people in their homes, is so that more banks won't FAIL!! It has nothing to do with helping people, and everything to do with rescuing Wall St. and his banking buddies, who made VERY bad bets by lending to these deadbeats to begin with!

TR

August 8, 2008 6:55 PM

Well Matt, the problem is even minorities with strong work backgrounds, down payments and good credit are getting risky loans. This is due to greedy agents and loan companies who received incentives for giving riskier loans. Don't blame the issue on helping people of all color in to a home regardless of financial well-being.

Elturco

September 26, 2008 12:12 PM

Well, nobody forced these low-income or middle-income pepole (not minorities) to buy these badly regulated, customer screwing mortgages at gun point. They were very happy when they were signing for these adjustable mortgages. Now, it's backfired on them.

Refecshun

October 23, 2009 1:12 PM

Absolutely disgusting! Where are the feds when needed. To marginalize any group, or person based on nationality, culture, skin color, sex, age, ability is like living in medieval Europe!

What few people in American will admit, IF they know, is that everyone has to qualify for a mortgage, and there is a commission paid on it at EACH end, and it gets worse when that "paper" is sold to another bank or mortgage company (even though the homeowner was told it wouldn't "cost" them a thing - it cost the world!) - there is a commission on each end, again and again. It wasn't the poor or middle class who did wrong, it was our nation for permitting on ongoing rape of consumers with the proliferation of get-rich-quick companies without any regulatory standards in place from DC under Bush! Never forget what his mother said at the Atrodome in Houston walking among the Katrina victims! That will set the mark for "from whence he came."

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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