Black and Hispanic Oregonians at all
income levels were more likely than
whites to have received subprime loans
in 2006, according to a study released in
January by the Oregon Center for Public
Policy, an economic research group.
Consumer advocates contend that
many homeowners have been pushed
into subprime mortgages they can’t afford
or persuaded to refinance unecessarily by
predatory mortgage brokers, who have
financial incentives to sign people to expensive
loans. In many cases, recipients of
the high-risk loans actually qualified for
better terms.
“We have seen a common practice
where someone with a prime rate credit
score sits down with their broker and
ends up being sold a high-interest subprime
loan,” said Angela Martin, director
of the Economic Fairness Coalition at
the progressive advocacy group Our
Oregon.
The Center for Responsible Lending
projects that 8,372 homes in Oregon
ultimately will be lost to foreclosure on
subprime loans made in 2005 and 2006.
Those foreclosures will have a disproportionate
impact on minority homeowners,
according to the OCPP.
In 2006, their study found, about half
of middle-income black and Hispanic
borrowers in Oregon received subprime
loans, compared with 25 percent of white
borrowers making the same amount of
money. The disparity appeared at every
income level. The study does not account
for borrowers’ credit ratings, which could
explain some of the difference, but according
to Michael Leachman, an OCPP policy analyst, there is more than just credit at issue.
“It strikes us that we’ve established a kind of two-tier
mortgage market that has obvious racial implications,”
Leachman said. “It’s built into the structure of how banks
tend to reach minority buyers.” While banks wait for
customers to come to them, he said, brokers actively
seek out potential borrowers and encourage them to
refinance their homes. “The mortgage broker represents
themselves as somebody who is really acting in [the
borrower’s] interest,” Leachman said, so “it seems like
it must be OK.”
The researchers looked specifically at the lending
practices of Washington Mutual, one of the largest
lenders in the country. It found that while most white
borrowers received their loans from Washington
Mutual itself, 63 percent of black and 74 percent of Hispanic homebuyers were served by Long Beach
Mortgage Co., a subsidiary of Washington Mutual that
deals through a network of mortgage brokers and
makes mostly subprime loans.
In 1996, three years before Washington Mutual
purchased Long Beach, the Department of Justice
filed a complaint that accused Long Beach of charging
higher loan prices to Black, Hispanic, female and older
borrowers than to their white male counterparts. The
same day the complaint was filed, Long Beach agreed
in a settlement to pay $3 million in damages to 1,200
clients, though it denied that its practices were discriminatory.
|
