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Study Finds Disparities Among Home Loans To Minority Borrowers

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

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 high-cost loans in
380 metro areas, also concluded that while the disparity among 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.

Low-income blacks in all areas were more likely to have
pricey loans than whites with similar incomes.

The report uses the Federal Reserve’s definition of
high-cost loans:mortgages whose rates are at least 3 percentage points above
Treasury securities. That definition includes most subprime loans given to
people with weak credit records.

The study points to the persistence of discrimination
against minorities, said John Taylor, chief executive of the Washington-based
group, which has been pushing hard this year for legislation to restrict what
it says are widespread abusive lending practices.

“Certainly discrimination has not disappeared in this
country, by any stretch,” he said.

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
of money 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 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 report also found much smaller disparities between
Asians and whites.

The study found the worst disparities in Charleston,
S.C.; Bridgeport,
Conn.; Omaha,
Neb; 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.

S&P said it may slash its rating on 612 classes of
mortgage-backed bonds issued by such banks as Citigroup Inc., Bear Stearns
Cos., Lehman Brothers Holdings Inc., Morgan Stanley, Merrill Lynch & Co.,
and JPMorgan Chase & Co.

Dozens of subprime lenders have since gone bankrupt as banks
have become more reluctant to put money behind risky mortgage loans.

– Associated Press

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