New Report: Racial and Gender Disparities in Mortgage Lending

Posted by on June 22, 2009

On the Anniversary of the Passage of Voting Rights for Women, New Report Details the Experiences of Minority Women in the Subprime Lending Market and Disparate Treatment by Race

Fair access to credit remains an elusive ideal for many borrowers

90 years after the passage of the 19th amendment by Congress, a new report for the National Council of Negro Women (NCNW) researched by the National Community Reinvestment Coalition (NCRC) shows that African American and Latino women continue to receive disparate treatment in the mortgage lending process. The report, Assessing the Double Burden: Examining Racial and Gender Disparities in Mortgage Lending, demonstrates that minorities continue to be much more likely to receive high-cost home mortgage loans than their white counterparts. In many instances, disparities by race widened as income levels increased, one of many indicators that discrimination remains a reality in home mortgage lending, as reports by the Federal Reserve and others have documented.

The economic crisis is the end-result of a foreclosure epidemic that had its roots in the targeting of communities of color for high cost loans for many years.  While the current recession, characterized by high levels of unemployment, has spurred additional foreclosures across broad segments of the US population, this report finds that the first groups to experience disproportionately high rates of foreclosure were minorities. As the foreclosure crisis continues to spread to suburban areas, this study suggests that middle- and upper-income minorities will continue to experience a disproportionate impact, which is especially pronounced for African-American women.

“The financial crisis has demonstrated that the key to a robust and sustainable economy is the inclusion and full participation of all households in an efficiently functioning and responsible financial system,” said John Taylor, NCRC president and CEO. “African Americans and Latinos continue to be treated unfairly when receiving a loan. This report documents troubling lending disparities that threaten to undermine the wealth and security of the most financially vulnerable Americans.”

Dr. Avis Jones-DeWeever, of the National Council of Negro Women adds, “In an era of change, this report shows that there is still much more work to be done.  Given the importance of homeownership to families and entire communities, it becomes clear that we simply cannot rest until every person, regardless of race or gender, is treated fairly at every stage of the mortgage lending process.  Results like those uncovered by this study make it painfully clear that for far too many, fair treatment in mortgage lending remains an elusive and still unfulfilled goal.”

The report examined data collected under the Home Mortgage Disclosure Act for the year 2007 (the latest year for which data is publicly available) for 100 of the largest Metropolitan areas (MSAs) in the country. The report includes a ranking of MSAs by worst overall disparities. Among the findings:

·         Middle- and upper-income African-American females were at least twice as likely to receive high-cost loans as middle- and upper-income white females in more than 84 percent of the metropolitan areas examined.

·         Low- and moderate- income African-American females were at least twice as likely to receive high-cost loans as low- and moderate-income white females in 70 percent of the metropolitan areas examined.

·         Middle- and upper-income Hispanic females were at least twice as likely to receive high-cost loans as middle- and upper-income white females in almost 62 percent of the metropolitan areas examined.

·         Low- and moderate-income Hispanic females were at least twice as likely as low- and moderate-income white females to receive high-cost loans in 32 percent of the metropolitan areas examined.

·  The report found that the ten worst MSAs for overall lending disparities by were:

1. Raleigh-Cary, NC
2. Minneapolis-St. Paul-Bloomington, MN
3. Milwaukee-Waukesha-West Allis, WI
4. Bridgeport-Stamford-Norwalk, CT
5. Washington-Arlington-Alexandria, DC
6. Chicago-Naperville-Joliet, IL
7. Cleveland-Elyria-Mentor, OH
7. Hartford-West Hartford-East Hartford, CT
9. Oakland-Fremont-Hayward, CA
10. Philadelphia, PA.

In response to the reports findings, NCRC recommends that Congress should strengthen the Community Reinvestment Act of 1977, to close loopholes and exceptions currently in the law and require greater scrutiny of racial/ethnic disparities in lending. Additional data could be collected under CRA to allow for similar studies to be done examining race, gender and small business lending practices, information which banks are currently not required to collect.

Download the full report at http://www.ncrc.org.

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The National Community Reinvestment Coalition is an association of more than 600 community-based institutions that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development, and vibrant communities for America’s working families.