An analysis of mortgage lending patterns in 2006 reveals that minorities were more likely to get high-cost loans than whites, and that the problem was even more pronounced as income levels increased.

The analysis, by the National Community Reinvestment Coalition, "suggests that some level of discriminatory behavior continues in the mortgage finance market," the group said in a press release. The study, "Income is No Shield," called for Congress to pass a comprehensive anti-predatory lending law and legislation to make prime loans more available in minority communities.

A Federal Reserve analysis of the same data released last year reached similar conclusions, but said part of the difference in the incidence of higher-priced loans between ethnic groups could be explained by factors such as property location, income and loan amount. Other information that might explain the differences — including credit scores, loan-to-value and debt-to-income ratios — is not collected from lenders under the Home Mortgage Disclosure Act (see story).

But the NCRC study said loan-price disparities were even more common for middle- to upper-income African-American and Hispanic borrowers than pricing disparities for low- and moderate-income minority borrowers.

The study also identified the 20 metropolitan areas where racial disparities in lending were most prevalent. The top five problem areas were Milwaukee, Wis.; Minneapolis-St. Paul, Minn.; Huntsville, Ala.; Ann Arbor, Mich.; and Hartford, Conn.

All 184 metro areas ranked in NCRC’s analysis showed a high disparity between low- and moderate-income (LMI) African-American and white borrowers. The five metro areas with the smallest disparities were Phoenix-Mesa-Scottsdale, Ariz.; Tucson, Ariz.; Alexandria, La.; Killeen-Temple-Fort Hood, Texas; and San Antonio, Texas.

NCRC called on Congress to pass "a comprehensive anti-predatory law that prohibits steering or price discrimination," citing The Homeownership Preservation and Protection Act of 2007, SB 2452, as "an excellent start for an anti-predatory lending bill."

The bill was introduced in December by Sen. Chris Dodd, D-Conn., and promptly referred to Dodd’s Senate Banking Committee, where it has languished. SB 2452 would lower the threshold for loans to be subjected to the stricter requirements for high-cost mortgages in the Home Ownership Equity Protection Act, or HOEPA.

Exercising its powers under HOEPA, the Federal Reserve this month rolled out tighter Truth in Lending Act rules for lenders, most of which are scheduled to take effect in October 2009. Some of the new rules, such as restrictions on prepayment penalties, apply only to higher-priced mortgages. Others provisions, such as prohibitions on deceptive advertising practices, will apply to all loans (see story).

The NCRC report also recommended that Congress pass the Community Reinvestment Modernization Act of 2007, HR 1289, saying it would encourage more prime or market-rate lending to minorities.

That bill was introduced in March 2007 and referred to the House Committee on Financial Services. HR 1289 would mandate that securities companies, mortgage banks and insurance companies have "a continuing affirmative obligation to meet the financial services needs in their assessment areas, including those of low- and moderate-income neighborhoods and persons of modest means."


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