Minorities Still Discriminated Against in Lending
By Kelly Field
WASHINGTON, Feb. 28– The majority of blacks and Hispanics surveyed in a national poll believe that white men are favored in the lending process, according to a poll made public yesterday by the National Community Reinvestment Coalition (NCRC) at its annual conference.
The poll, which surveyed 1,258 Americans, also showed that 26 percent of blacks and 20 percent of Hispanics believe that they have been discriminated against in getting a loan.
John E. Taylor of Boston, the president and chief executive officer of the NCRC, said that the findings prove that discrimination in lending persists and that increased oversight is needed to ensure that poor and minority communities are served. Taylor and several Massachusetts members of the coalition are in Washington this week to build support for legislation that would extend the 1977 Community Reinvestment Act (CRA) to mortgage and insurance companies and require insurers and lenders to provide demographic data, with the applicant’s consent.
This would make it easier to gauge whether lending institutions and insurers are providing loans to minority and women-owned businesses, Taylor said.
The CRA rates banks on the number of loans, investments and services they offer to residents of low and moderate-income communities. In the past 25 years, the law has been credited with increasing home and small business ownership and lowering crime.
The poll also addresses the issue of so-called “predatory loans”, defined by the NCRC as “a subset of sub-prime loans·.designed to exploit vulnerable unsophisticated borrowers.” These can include loans that charge exorbitant interest and fees, carry higher rates than the applicant’s credit history would justify, and that do not take into account the borrowers ability to repay. According to the poll, 76 percent of all respondents believe that lenders deliberately steer women and minorities towards unsuitable loans.
Often, said Florence Hagins of the Massachusetts Affordable Housing Alliance, the victims are people with poor or no credit ratings who are desperate for a loan–any loan.
“People that are strapped for cash think of it as a way out. They don’t read the fine print,” she said.
Immigrants-who may have little or no credit history–are also frequent targets said Kristin Harol, deputy director of Lawrence Community Works. Harol, whose organization runs a home ownership program, said she is accustomed to seeing immigrants come in with loans with 14 and 15 percent interest rates.
“The Latino population is hungry for home ownership and may be willing to take on a bad loan to pay,” Harol said. “Rents in Boston are so exorbitant that it seems like a good deal.”
According to Lawrence’s Len Raymond, head of Homeowner Options for Massachusetts Elders, Lawrence has the second-highest rate of sub-prime loans in Massachusetts. Only Springfield has a higher rate.
A “certain segment” of these loans are “undoubtedly predatory,” he said. “These guys are not interested in [applicants’] ability to pay. There are a lot of them that are equity strippers.”
Harol said she also sees banks “overqualifying” homebuyers, providing them with mortgages they can’t afford and then threatening to repossess their homes if they can’t make payment. With the current recession and resulting layoffs, many borrowers are worried that they will not make their high interest payments and will default on their homes, she and others said.
“There is some growing fear of increased default and disclosure,” particularly in Lawrence, Chelsea, Dorchester and Brockton, said Andrea Luquetta, director of housing and community investment at the Massachusetts Association of Community Development Corporations.
Members of the NCRC are working to build support for a Predatory Lending Consumer Protection Act that would expand the number of high-cost loans that are subject to consumer protections.
“As we have seen with Enron, there may be room for more oversight of sleazy businessmen,” said Al Franken, a former Saturday Night Live producer known for his political impersonations and his Stuart Smalley persona; he backs the legislation.
At the conference, members of the banking and lending community disputed these criticisms, saying that they are charging only what’s required to make a profit and protect themselves against risky clients.
“We are in the lending business; we do need to make money,” said Steve Nadar of Option 1 Mortgage. “We may not be as fat a business as people say.”
Liz Hall Ortiz of Citigroup said that the fact that only 10 percent of bank branches are in low and moderate-income neighborhoods belies accusations that lenders are “targeting” the poor.
And James Valentine of American Banking Association said that passing new legislation would only add more paperwork to an already overburdened process.
“People getting loans already don’t understand any of this,” he said. “This will double the amount of paper.”
When Taylor suggested that lenders could simply explain the terms orally, Valentine replied “This is Washington; you know that doesn’t happen.”
Answered Taylor, “I’m from Boston, not Washington.”
Published in The Eagle-Tribune, in Lawrence, Mass.
