Study Finds Disparities in Mortgages by Race
Home buyers in predominantly black and Hispanic neighborhoods in
New York City were more likely to get their mortgages last year from a subprime lender than home buyers in white neighborhoods with similar income levels, according to a new analysis of home loan data by researchers at
New York University.
The analysis, by N.Y.U.’s Furman Center for Real Estate and Urban Policy, illustrates stark racial differences between the New York City neighborhoods where subprime mortgages — which can come with higher interest rates, fees and penalties — were common and those where they were rare. The 10 neighborhoods with the highest rates of mortgages from subprime lenders had black and Hispanic majorities, and the 10 areas with the lowest rates were mainly non-Hispanic white.
The analysis showed that even when median income levels were comparable, home buyers in minority neighborhoods were more likely to get a loan from a subprime lender.
In Jamaica, Queens, for example, where the majority is black and the median household income was $45,000 in 2005, 46 percent of the mortgages were issued by lenders who specialize in subprime loans, the second highest rate in the city. In Bay Ridge, Brooklyn, which had a median income of $50,000 and is mostly white, the rate was among the lowest in the city, with 3.6 percent of home loans coming from subprime lenders.
The analysis provides only a limited picture of subprime borrowing in New York City. The data does not include details on borrowers’ assets, down payments or debt loads, all key factors in mortgage lending. And comparing neighborhoods is inexact; the typical borrower in one may differ from a typical borrower in another.
Jay Brinkmann, an economist with the Mortgage Bankers Association, said there was not enough information in the Furman Center analysis and other studies on the issue to draw conclusions about whether subprime lenders were discriminating against minority home buyers. One of the crucial missing pieces is the credit histories of individual borrowers, he said.
But the Furman Center study, a summary of which is being released today, still raises questions about the role of race in lending practices. A separate analysis of mortgage data by The New York Times shows that even at higher income levels, black borrowers in New York City were far more likely than white borrowers with similar incomes and mortgage amounts to receive a subprime loan.
“It’s almost as if subprime lenders put a circle around neighborhoods of color and say, ‘This is where we're going to do our thing,’” said Robert Stroup, a lawyer and the director of the economic justice program at the NAACP Legal Defense and Educational Fund Inc.
The New York State Division of Human Rights is investigating whether subprime lenders have been engaging in discriminatory practices by singling out minority communities.
The Furman Center analysis is based on 2006 data that lenders disclosed under the federal Home Mortgage Disclosure Act.
The study focused on mortgages issued by lenders identified by federal housing officials as subprime specialists in 2005. The list is made up of 210 companies, including major mortgage lenders like
HSBC Mortgage Services and CitiFinancial, the consumer finance unit of
Citigroup. But some lenders not included in the list may issue subprime loans, and not every loan made by the specialized lenders is subprime.
Even so, housing and civil rights advocates said the findings highlight lending patterns that have long troubled them.
They say minority communities whose financing needs were starved decades ago because of redlining — banks’ refusal to offer loans or other services in minority areas — are now singled out for high-cost, high-risk mortgages in a kind of reverse redlining.
Any loan that carried an interest rate more than 3 percentage points above the prevailing rate for long-term Treasury bonds was considered a subprime mortgage. In 2006, Treasury rates ranged from 4.5 to 5.3 percent. Prime mortgage interest rates averaged 6.1 to 6.8 percent, according to the Federal Home Loan Mortgage Corporation.
Subprime loans are typically made to borrowers with credit histories that the mortgage industry considers less than prime. They can carry higher interest rates than traditional loans or adjustable rates that can make the mortgage difficult to repay once the interest rate resets. They can also carry higher fees and prepayment penalties and thus are at a high risk for foreclosure.
Kumiki Gibson, the commissioner of the State Division of Human Rights, acknowledged last week that her agency was investigating subprime lenders, but she said she could not discuss the details. “There was enough data to compel us to look into this,” Ms. Gibson said.
She said a variety of lending practices and patterns could be considered unlawful discrimination, like a mortgage broker who works only in certain neighborhoods or who offers white borrowers better rates than similarly qualified black or Hispanic customers. Many mortgages are handled by brokers who work as a liaison between borrowers and lenders and earn a fee.
1) why the fukk is this funny to you
and its exactly why I shared it.
