California’s Largest Banks Short Change African American & Latino Borrowers.

A just released report on bank lending to minorities in California found that Citigroup, HSBC and Wells Fargo each made home loans that cost African Americans and Latinos more than 2 1/2 times as much as most other bank customers. The report, “Who Really Get Home Loans: Year Eleven” documents a high-priced credit system for minority households in the cities of Fresno, Los Angeles, Oakland, Sacramento and San Diego. The report was compiled by the Bay Area-based California Reinvestment Coalition (CRC).

“What you look like and where you live should not determine whether you get a loan, or how much it costs,” said Kevin Stein, CRC’s Associate Director. “Citigroup, Countrywide, H&R Block, HSBC, National City, Washington Mutual and Wells Fargo must ensure that every customer has equal access to the lowest cost loan product for which they qualify, and that all loans are priced fairly.”

The CRC report, “Who Really Gets Home Loans: Year Eleven,” identifies three key trends:

1. People of Color Pay More. Citigroup, HSBC and Wells Fargo each made loans in California that carried Annual Percentage Rates (APRs) of over 15%, when most bank customers could get a mortgage loan with an APR of 6%. African American borrowers getting a loan from one of the seven corporations analyzed were more than three times as likely as white borrowers to be paying for a higher cost loan. In Los Angeles, higher cost subprime lender Option One Mortgage made 476 loans to Latino borrowers, while its lower cost H&R Block Mortgage affiliate made only 39 loans to Latinos. Option One Mortgage does not
offer its best customers a lower cost prime loan.

2. Higher Costs for People of Color Are Not Explained by Income Disparities. Upper-income African American and upper-income Latino borrowers were more likely to be denied for less expensive bank loans than white borrowers who had lower incomes. At the same time, upper-income African Americans and Latinos were 3.9 times and 3.3 times as likely to get higher
cost subprime loans as whites with the same income.

3. The Cost to Borrowers of Subprime Lending is High. An interest rate that is higher than the going rate by 3% costs the borrower $541.99 more per month, and $195,117 more in interest payments over the life of the loan. Subprime loans often carry even higher rates. Subprime loans are also more likely to contain harmful loan terms that trap borrowers into high cost loans and strip hard-earned equity from the borrower and the community.

In light of these findings, CRC recommends:

— Lenders increase the number of branches in underserved neighborhoods and create incentives for loan officers and brokers to offer borrowers the lowest priced loan for which they qualify;
— Regulators provide more rigorous examination and enforcement of bank lending practices to ensure that all borrowers are treated fairly regardless of the color of their skin; and require banks like Countrywide Bank to reinvest in all local communities where they are located and conducting banking business in order to ensure they are meeting the credit needs of
California communities;
— Policy makers must provide greater protections for California residents in the form of a stronger state anti predatory lending law, and by opposing the federal Ney-Kanjorski bill which protects too little while preempting too much. The Miller-Watt-Frank bill offers a better alternative for consumers as it provides greater rights to borrowers, and it permits state governments to pass stronger anti predatory lending laws with greater protections.

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