People Of Color Pay Millions More Monthly.

The California Reinvestment Coalition (CRC) released a new report finding that people of color, communities of color and rural towns are more likely to receive higher-cost home loans, and that people of color in California could be paying $50 million more than white borrowers every month as a result of higher-cost home loans.

“What you look like and where you live should not determine how much you pay for a loan,” said Kevin Stein, associate director of CRC. “Higher-cost lenders are draining wealth from families’ pocketbooks and doing so in a way that is having a large and disproportionate impact on certain California communities.”

The report documents a high-priced credit system for minority households in 12 California cities: Delano, El Centro, Fresno, Los Angeles, Modesto, Oakland, Oxnard, Sacramento, San Diego, San Francisco, Salinas and Yuba City.

The CRC report, “Who Really Gets Higher-Cost Home Loans?” identifies six key trends:

* The cost to borrowers of higher-priced lending is great. The average higher-cost home loan borrower in California paid approximately $691.76 more per month on his or her home loan than a borrower who received a similar loan but at the going, lower-cost prime rate.

* Large banking companies are charging higher rates to people of color. There were 264,348 higher-cost loans made in California in 2004. Many of these higher-cost loans were made by the largest financial companies in the world: General Electric, Countrywide, Lehman Brothers, Washington Mutual, H&R Block and Bank of America. And Citigroup, HSBC and Wells Fargo each made hundreds of loans with Annual Percentage Rates of 13 percent or higher, at a time when most loans came with interest rates of 5.84 percent.

* People and neighborhoods of color are two to four times as likely to get higher-cost loans. Residents of minority neighborhoods were nearly four times as likely as those in white neighborhoods to get a higher-cost home purchase loan.

* Rural communities are greatly impacted by higher-cost lending. Delano saw 25 percent of its home loan borrowers receive higher-cost loans. El Centro, Fresno, Modesto and Yuba City had the next highest incidence of higher-cost lending.

Lee Pliscou, directing attorney of California Rural Legal Assistance, Inc, Marysville, said, “People in rural communities do not have access to the same kinds of financial services that are available in urban areas. This data, by itself, is very valuable for consumers to help choose a lender. And for rural residents, who might not have much of a choice, the data can suggest taking a close look at loan papers before signing.”

* Regulatory agencies need to do more. Regulatory agencies must exercise their full authority to investigate illegal lending practices and enforce fair lending laws. Lending by national banks regulated by the Office of the Comptroller of the Currency (OCC) displayed the greatest disparities. National banks were 4.15 times as likely to make higher-cost refinance loans to African Americans as they were to white borrowers.

Heidi Li, Co-Director of Housing and Economic Rights Advocates (HERA), a statewide not-for-profit housing rights and consumer protection legal organization asserts, “A critical need exists now for both federal and state regulators to step up and investigate with greater scrutiny the financial and lending institutions they are entrusted with overseeing and monitoring. It is very disturbing when the analysis of lending patterns of high-cost loans to whites vs. African-Americans or Latinos in major California metropolitan areas such as Oakland shows such an obvious disparity.”

* Fringe financial providers are crowding out mainstream banks in local communities. In addition to being overrun by higher-cost mortgage lenders, low-income communities, communities of color and rural neighborhoods are being inundated by high-cost check cashers and payday lenders. In eight of the 12 cities studied, check-cashers equaled or outnumbered bank branches. In Oxnard, 56 check cashing outlets dwarf 21 bank branches.

San Francisco Supervisor Tom Ammiano said, “High cost home lending, check cashing and payday lending are much more prevalent in diverse, working class neighborhoods like the Mission District in San Francisco. Banks need to do a better job of offering low cost mortgages and other financial products to underserved communities.”

“California consumers are targeted and become vulnerable borrowers. Home ownership is the most critical decision one makes. Educating the public is the ultimate goal of the Monterey County Housing Alliance (MoCHA),” said Maria Giuriato, MoCHA Chair.

To view report CLICK below (Adobe Acrobat reader required):

http://www.calreinvest.org/pdf/CRC_highcostloans1205.pdf

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