Statement from Michael D. Calhoun, President-Center for Responsible Lending: Release of 2007 HMDA Data Shows Disparities Persist


Center for Responsible Lending
September 11, 2008

The preliminary report issued today by Federal Reserve Board on mortgages made in 2007 suggests that troubling lending patterns of years past persisted, with Latino and African-American families continuing to receive a disproportionate share of  high-cost, subprime home loans compared with non-Hispanic white families.

Though the Center for Responsible Lending (CRL) has not finished a full analysis of the information, which the Fed collects under the Home Mortgage Disclosure Act (HMDA), an initial review shows that abusive lending patterns continued even though the number of higher-cost mortgages made to all borrowers fell last year. Only about half of the disparity can be explained by differences among borrowers in income, gender and loan-size; by whether a borrower has a co-signer; or by the location of the home.

Coupled with the nation's struggle with the economic fallout from subprime mortgages, the report is further evidence that mortgages lenders have failed to fully serve the communities where they do business. The report underscores the need for a strong regulatory framework that protects borrowers from unfair and deceptive practices and requires lenders to put families in the best and most affordable loan for which they qualify.

"This isn't just a matter of paying more. These numbers highlight how communities of color are being hit hardest by the foreclosure crisis," said CRL President Michael Calhoun.  "Research by CRL and others shows that a high share of these families could have qualified for less expensive loans—loans that would have provided a basis for successful homeownership.  Now that dream is being dashed for millions of people who already lagged behind financially."

As shown below, the Fed's report indicates that over one-third of African-American homeowners received a higher-cost loan last year, and Latino families didn't fare much better. But the portion of higher-cost loans made to white non-Hispanic families was sharply lower. That adds up to a fact that should concern everyone: African-Americans were two to three times more likely to receive a higher-cost loan in 2007 than a white non-Hispanic family, and Latino borrowers were one and a half to almost three times more likely. 

2007 HMDA Results – Share of High-Cost Loans

HOME PURCHASE LOANS

Race/Ethnicity

% Higher-cost loans 2006

% Higher cost loans 2007

2007 Disparity Ratio (compared to Whites)

Non-Latino White

17.71%

10.57%

NA

African-American

53.75%

34.17%

3.23

Latino

46.62%

28.68%

2.71

Refinance Loans

Race/Ethnicity

% Higher-cost loans 2006

% Higher cost loans 2007

2007 Disparity Ratio (compared to Whites)

Non-Latino White

25.75%

18.25%

NA

African-American

52.81%

41.43%

2.27

Latino

37.70%

27.02%

1.48

CRL has published research showing that, for most types of subprime loans, African-American and Latino borrowers have a higher risk of receiving higher-rate mortgages, even after controlling for credit scores and other legitimate risk factors.  The Wall Street Journal reported that six out of 10 African-American borrowers in 2006 could have qualified for less expensive loans.

"Abusive lending combined with loose protections led directly to the foreclosure crisis," said Calhoun.  "Lenders and government now have an obligation to do more to keep people in their homes and prevent even more economic devastation."

Among the policies that CRL supports is delaying foreclosure sales up to nine months to give homeowners more time to marshal resources to keep paying their mortgage and stay in their home.  Learn more about policy solutions to the foreclosure crisis.

For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Sharon Reuss at (919) 313-8527 or sharon.reuss@responsiblelending.org; or Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org.

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About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.