African-Americans and Latinos pay more for mortgages.

The Federal Reserve released figures showing once again that African-Americans and Latinos pay more for mortgages than white borrowers. Data collected from lenders for 2005 show that a majority of loans (52%) to African-Americans and more than one in three loans (40%) to Latinos were higher-cost. White borrowers received a much lower portion of higher cost loans, only one in five, or 19%.

Some lenders and their lobbyists will claim that these disparities occur because minorities pose higher financial risks and so get charged more for a loan.

The Center for Responsible Lending, which fights predatory lending, had its doubts.

So, in the largest study of its kind, last spring we looked at borrowers in the subprime mortgage market, which targets people with impaired credit and found something shocking: African-American and Latinos were more than 30 percent more likely to pay more for mortgages than whites.

“As the HMDA numbers continue to demonstrate, racial and ethnic discrimination are still rampant in our nation’s mortgage lending practices. Continuing inequality, most prominently predatory lending, is a major civil rights issue of our day,” said Hilary Shelton, the director of the NAACP Washington Bureau.

How does this happen? We — and many housing experts — suggest there’s another reason for these racial and ethnic disparities: yield-spread premiums, or YSPs. That’s what the industry calls them. They are kickbacks. Lenders pay these kickbacks to mortgage brokers for steering customers into loans with higher interest rates when their credit ratings
would qualify them for a cheaper loan.

“Thousands of Latino families rely on mortgage brokers each year to realize their dreams of homeownership. Unfortunately, the trust they place in their mortgage professional is too often violated. Without accountability, making money could trump the needs of Latino families,” said Janet Murguia, President and CEO of the National Council of La Raza.

“Predatory lenders are bilking billions of dollars from people who are simply trying to buy a home and get ahead, and the Fed numbers give us a glimpse of exactly who is getting the short end of the stick,” said Michael D. Calhoun, president of the Center for Responsible Lending.

For more information at http://www.responsiblelending.org