Industry NewsMortgage

Study: Income magnifies racial disparities in high-cost lending

NCRC analysis of HMDA data calls for tighter anti-predatory-lending laws
Published on Jul 12, 2007

It's no secret that minorities are more likely than whites to take out high-cost mortgage loans, but a new study finds racial disparities are even more pronounced among middle- and upper-income borrowers. An analysis of loan data by the National Community Reinvestment Coalition suggests that minorities are more likely to get stuck with high-cost loans because they are targeted by lenders, not because they are less creditworthy, the group said. Although it's logical to assume that racial disparities in the prevalence of high-cost loans would decrease at higher income levels -- because wealthier borrowers presumably have better credit scores -- the NCRC study found the opposite was true. In their analysis of loan data collected by the Federal Reserve in 2005, NCRC staff found wealthier borrowers of all races were less likely to take out higher-cost loans than low- and moderate income borrowers of the same race. But the study found the reduction in the use of high-cost loans by relativel...