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Minorities unfairly pushed into subprime, study finds

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Mortgage Professional America | 12 Aug 2013, 07:19 AM Agree 0
A new study has found that wealthy minorities were more likely to be denied prime mortgages than affluent whites, and has partially blamed the proliferation of subprime lenders leading up to the housing crash on racial discrimination
  • Rick | | 12 Aug 2013, 09:22 AM Agree 0
    Did they base only on income only or debt to income ratio?
  • Mike Silkworth | | 12 Aug 2013, 09:24 AM Agree 0
    Not really an opinion, but rather a question. Did this Meta-Analysis of the HMDA data capture information on the racial and ethnic profile of the Lender? If a borrower is seeking out a mortgage from someone of similar race and ethnicity - is there an issue with the availability of non-sub-prime products made available to minority lenders? Also has there been any follow up to see if the mortgage officer compensation rules have changed the distribution of prime vs sub prime mortgages?
  • Tim | | 12 Aug 2013, 09:25 AM Agree 0
    Interesting article, but one question remains open, what were their FICO scores. The article leaves many unanswered questions.
  • Patti | | 12 Aug 2013, 09:33 AM Agree 0
    I could NOT disagree with you more! This study is a complete farce. Did they check the income and credit on all these discriminatory mortgages? I have been in Mortgage Banking over 30 years and have yet to see any proof this is happening. I have underwritten mortgages from one side of this country to the other. Closed mortgages, new mortgages, delinquent mortgages. Subprime, prime Govt. It is articles like this that should not be presented without absolute facts and where they came from. The lowest and worst of the worst in our industry is colorblind.
  • Rich Eisenhuth | | 12 Aug 2013, 09:33 AM Agree 0
    I believe factors independent of income are evaluated for mortgage approval. Were those critical factors reviewed for the purpose of this study?
  • CharlieG | | 12 Aug 2013, 09:46 AM Agree 0
    Rubbish. They address income only and not credit. I have been in the mortgage industry for 42 years and my anecdotal observations are that black people usually have lower credit scores and, prior to credit scoring, had weaker credit. Bill Clinton and Mario Cuomo, then HUD secretary, hammered lending institutions to make crappy mortgages to meet CRA requirements. Don't blame this on prejudice, blame it on the politicians. While I'm at it, you can throw Franklin Raines and Jamie Gorelick into the poop pile for their roles in pushing FNMA into buying toxic junk and subsequently bankrupting it. Try readiing the "Underwriting the Low-to Moderate Income Borrowers" manual published by Fannie in 1992 as prima facie evidence of their complicity. Racism? My ass!
  • BGM | | 12 Aug 2013, 10:01 AM Agree 0
    The main reason that the subprime lenders grew was the appetite Wallstreet had for these mortgages. Have any studies been done on FHA mortgages?
  • Randall C. Thomas | | 12 Aug 2013, 10:02 AM Agree 0
    I could not disagree with an article any more. It's time that adults of all colors started acting more like adults and less like winers. Put on your big boy panties and start in the mirror when you look for blame. Next time you do a story like this please serve cheese with all the wine.
  • Jim Malloy | | 12 Aug 2013, 10:07 AM Agree 0
    Brokers and mortgage officers made more money on the back side from conforming mortgages than from sub prime mortgages. I would place someone (anyone) in a FNMA or Freddie mortgage all day long for higher pay. (Their were some exceptions but there usually is).

    Why didn't they mention anything about credit scores?

    Be careful folks, this is left wing propaganda. Next they will try to ruin the system more with new laws and regulations that don't help anyone but only hurt everyone. If you are in the industry you know what I mean. We all need to see this and try to bring back free enterprise with fair regulations so politicians don't manipulate for their agendas.
  • Thomas More | | 12 Aug 2013, 10:08 AM Agree 0
    A new study has.. has partially blamed the proliferation of subprime lenders leading up to the housing crash on racial discrimination. Now that we have historical information; what has been the default rate per group? If you can show that it is equal you will substantiate the study's hypothesis. Has the rate of default been equal and therefore the regard of higher risk was erroneous? I have no figures and would like to know.
  • Habttac | | 12 Aug 2013, 10:08 AM Agree 0
    Ok - now control for who offered the mortgage. Was it someone from the same racial category? I owned a brokerage for 10 years and was called by Countrywide at one point because they were concerned our Latino clients were being charged more for their mortgages. Who was doing all of our Latino mortgages? Latinos. We saw this abuse of trust ALL the time.
  • Rob S | | 12 Aug 2013, 10:25 AM Agree 0
    Did any of these studies take into account borrower's credit scores? This was a huge part of a mortgage mortgage application and determined to a great degree what type mortgage a person received.
  • Evelyn Santiago | | 12 Aug 2013, 10:28 AM Agree 0
    No surprise here. I personally was pushed into a subprime mortgage after initially being approved for a standard mortgage at the last minute. So you either cancel or take what is offer. Switch and bait at it's finest. The fact that the originator made twice as much on a subprime also had a bearing on it.

    As a licensed realtor I decided to get my mortgage origination license to really understand the industry and was disgusted enough by the games that after 2 years I gave it up.

    Now at least I have some knowledge about what really went on.
  • Chris Swanson | | 12 Aug 2013, 10:33 AM Agree 0
    Maybe all those people had poor credit - no mention of credit profiles in the study.
  • MI Hard Money Lender | | 12 Aug 2013, 10:54 AM Agree 0
    This "study" seems to only mention borrowers with higher incomes but I don't read anything about credit history or credit scores, pretty obvious omission?
  • Joe Paonessa | | 12 Aug 2013, 11:38 AM Agree 0
    While the author's conclusions may be valid, at least in this synopsis no mention is made of whether the author substantiated the incomes of these "higher incomes" minorities and those of the non-minorities to arrive at his conclusion. Sub-prime mortgages-as has been discovered and to no one's surprise in the industry at the time-were oftentimes "stated income" or "no income verification" mortgages aka today "liar mortgages." Nor is anything said about the credit scores or lack thereof. Both of these are substantively important in drawing any conclusions.
  • Rick | | 12 Aug 2013, 12:15 PM Agree 0
    I'm call BS on this study. I'll bet I could find that minorities, if they had qualifying credit, received prime mortgages. Being "Unfairly pushed" Sounds like a political agenda to me. Where is the individule responsibility of the buyer to know what mortgages they would qualify for. Or why didn't they shop for a better mortgage before signing on the dotted line?
  • Curt Sandfort | | 12 Aug 2013, 12:23 PM Agree 0
    Everyone in the business knows that income is not by itself a "risk evaluator", why no mention of credit histories, or average FICO scores???? That would be the smoking gun, but since no mention of that, we should assume that credit scores were not evaluated?
  • Andrew | | 12 Aug 2013, 02:07 PM Agree 0
    What were their credit scores?
  • Grain of Salt | | 12 Aug 2013, 03:26 PM Agree 0
    Looking only at the rate and not considering PMI as a cost factor for a prime mortgage is a grave error. 80/20 FIXED RATE piggy back Sub-Prime mortgages were LESS EXPENSIVE than Prime 100% financing WITH PMI AND gave borrowers a larger tax deduction because PMI was not tax deductible at that time.
    In addition, Jacob Fowler’s public release reveals he neglected several criteria used to evaluate risk, namely LTV/down payment and credit scores. Even the inclusion of these will not document borrowers circumstances which vary wildly and determine what they qualify for. Income is only ONE criteria used to determine risk therefore his conclusion should be considered suspect.
    He is a student in Sociology, not a researcher or scientist and evidently assumed HMDA data is complete and would tell the whole story. You tend to find the outcomes you look for…
  • V Lee | | 12 Aug 2013, 04:25 PM Agree 0
    This is the craziest thing I have ever heard. What does a high income have to do with credit risk?? I have seen many people - of all colors - that make a lot of money but have a lot of debt OR have bad credit. Did they ask what the credit scores were for these people that were "pushed into subprime mortgages"?? As a mortgage broker, I ALWAYS would prefer to do a conventional mortgage for a borrower - again, no matter what their race. The subprime mortgage was always a last resort and only because their credit was not so good or the debt to income ration was high. This is just wrong.....
  • Jeff | | 12 Aug 2013, 05:43 PM Agree 0
    There is no mention of what the credit scores of the applicants were. Regardless of your income, if your scores don't measure up you will not get a conventional mortgage.
  • peter | | 15 Aug 2013, 12:57 PM Agree 0
    Emailed the author of the study asking what everybody else is asking. What was the credit history of those borrowers? Obviously you can't do a study with the third leg of underwriting. Useless study without it.
  • NoSpinJustTheFacts | | 21 Aug 2013, 10:16 AM Agree 0
    Yet another manipulation of facts by selectively leaving out credit history, appraisal, down payment amount and source of funds.

    The lending criteria intelligence of study's author is obviously a deficit when proclaiming that income should indicate lower credit risk. Income is only realtive to the amount of debt, not the repayment risk. Where is the study's debt-to-income analysis?
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