Illinois Attorney General Lisa Madigan is investigating both Countrywide Home Loans and Wells Fargo Financial Illinois for illegally steering Blacks and Hispanics into high priced mortgage loans, in violation of civil rights and equal lending laws!
Even relatively wealthy African Americans with stellar credit and six figure incomes were charged higher interest rates than their white counterparts who earned only a third their incomes!
Madigan's investigation follows on the heels of a The Chicago Reporter study which found that between 2004 and 2006, Countrywide Home Loans placed the following groups into high cost loans....
- 50.9% of African Americans earning over $100,000
- 33.8% of Hispanics earning less than $35,000
- 21% of Whites earning less than $35,000
- 11.8% of Asians earning less than $35,000
Additionally, The Chicago Reporter study found that during the same period, Wells Fargo Financial Illinois placed the following groups into high cost loans....
- 64% of African Americans earning over $100,000
- 36.7% of Hispanics earning less than $35,000
- 17.5% of Whites earning less than $35,000
Also, even though National City Bank of Indiana is a prime-rate lender, in 2005 about half of its mortgages were high-cost loans, with African Americans accounting for high-cost loans three-fourths of the time, Latinos two-thirds of the time, and Whites one-third of the time!
These disparities weren't justified by credit worthiness, income, or other factors, but appear to be racially motivated and highly unethical and illegal! Furthermore, these findings explain, at least in part, why Chicago-land leads the nation in high cost mortgage loans, and why the south-side of Chicago (with the largest concentration of minority home buyers in the city) has the state’s largest foreclosure rate!
http://cbrkelvinrealestate.typepad.com/the_ins_and_outs_of_real_/2007/10/half-of-minorit.html
Also, The New York Times published an article by Eric Eckholm on June 1, 2006 about racial disparities in lending which had been uncovered by a study done by The Center for Responsible lending. The study found that even when African Americans and Hispanics had the same credit risks (as Whites) they were charged higher interest than White borrowers!
While the findings of The Center for Responsible lending were disputed by the Mortgage Bankers Association of America, their findings were endorsed by representatives of both the National Association for the Advancement of Colored People and the National Council for La Raza.
Also, although Attorney General Lisa Madigan is focusing her investigation on Countrywide Home Loans, and Wells Fargo Financial Illinois, because she found them to be the most abusive, it is important to remember that the discriminatory practice of placing African Americans and Hispanics in higher priced loans than Whites representing the same credit risk is done by many banks and mortgage companies around the country, and is not restricted to the Chicagoland area!
http://www.nytimes.com/2006/06/01/us/01minorities.html
http://www.msnbc.msn.com/id/13081865/
Also, many Lenders go out of their way to be certain that you understand that disclosing your race on loan documents is completely optional, not mandatory, and that "you don't have to disclose your race if you don't want to." Therefore, and since many African Americans and Hispanics don't disclose their race, the percentage of African Americans and Hispanics abused by predatory lending and placed in high cost loans may be much higher than actually reported!
One of the things that these national studies prove is that just because a lender is large, reputable, has a huge staff, luxurious building and lots of money to lend, and just because you may not be aware of it, and even though racial discrimination in lending is illegal, that doesn't mean that banks and lenders both large and small aren't illegally discriminating against African Americans and Hispanics.
When a Real Estate agent tells you that they sell x number of houses a year, maybe you should ask how many of those buyers contacted the Real Estate agent because a lender referred them to him, or ask the bank why they referred a particular Real Estate agent!
Because of the fact that I encourage my buyers to shop around for the best loan product, and I’m loyal to my buyer clients and not any particular lender, I don’t get buyer referrals from lenders!
Another thing that you aren't required to do when buying a home is disclose any details of your loan with your Real Estate agent, as your agent isn't a party to the loan! I've had lenders refuse to tell me what interest rate a client was getting, if there was a ballon payment due in several years, etc. because I was not a party to the loan. But there are ways around this and I employed them on behalf of my buyer clients.
Lenders not sharing details of your loan with your Real Estate agent prevents the agent from advising you of the pros and cons of the loan, and robs you the buyer of the opportunity to shop around and find another more affordable loan!
http://www.lisamadigan.org/release_details.asp?id=25
http://www.chicagoreporter.com/index.php/c/Web_Extras/d/The_High_Price_of_Home_Ownership
