Unfair loan pricing hits borrowers at closing table

Part 1: Why do minorities pay more for their mortgages?
Published on Jul 17, 2006

(This is Part 1 of a two-part series. Read Part 2.) "I read about a study recently claiming that African Americans and Hispanics paid more for mortgages than white borrowers who were otherwise similar. Do you believe this to be true, and if so, why does it happen, and what should be done about it?" I have looked at the studies, including a very recent one by the Center for Responsible Lending (CRL). While most of the studies leave out important differences between the groups, including credit scores, the CRL study takes into account credit and other relevant factors, and its findings are the same. They find that minorities generally pay more, which rings true to me. To understand how and why it happens, it is necessary to understand how mortgages prices are determined. In more than 90 percent of the transactions, it is a two-stage process. Stage 1 is the development of posted prices that are delivered to loan officers and mortgage brokers. Stage 2 is the determination of final prices p...