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Thursday, July 12, 2012

Minority Borrowers Paid More for Mortgages

Nope, there's no need for regulation of financial markets, or for something like a consumer financial protection bureau:

Justice Department Details Higher Rates Charged to Minority Borrowers, by Janet Paskin, WSJ: At least 34,000 African-American, Hispanic and other minority borrowers paid more for their mortgages or were steered into subprime loans when they could have qualified for better rates, according to the Department of Justice. The DOJ settled a fair-lending lawsuit with Wells Fargo, the nation’s largest mortgage lender, on Thursday.

That adds up to real money – and, in some cases, real stress:

As a result of being placed in a subprime loan, an African-American or Hispanic borrower… was subject to possible pre-payment penalties, increased risk of credit problems, default, and foreclosure, and the emotional distress that accompanies such economic stress.

The complaint also says that between 2004 and 2008, “highly qualified prime retail and wholesale applicants for Wells Fargo residential mortgage loans were more than four times as likely to receive a subprime loan if they were African-American and more than three times as likely if they were Hispanic than if they were white.”

During the same period, the complaint says, “borrowers with less favorable credit qualifications were more likely to receive prime loans if they were white than borrowers who were African-American or Hispanic.” ... Bank of America agreed to pay $335 million in settling similar charges in December. ...

I suppose I should add: It wasn't the CRA.

    Posted by on Thursday, July 12, 2012 at 12:15 PM in Economics, Housing | Permalink  Comments (62)


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