Minorities Targeted for Risky Loans: Study

The ""National Community Reinvestment Coalition"":http://www.ncrc.org/index.php?option=com_content&task=view&id=579&Itemid=116 (NCRC) recently released findings of a new study indicating that subprime lending and subsequent resulting foreclosures contained a clear racial component not explained by objective underwriting criteria.

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According to the study, African American and Latino borrowers were more likely to receive a subprime loan and go into foreclosure than similarly situated white homeowners, controlling for credit risk and other borrower, neighborhood, and loan characteristics.

In addition, the study found that the government sponsored-enterprises (GSEs) appeared to have a moderat-

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ing effect on risky and abusive lending practices, as privately-securitized loans went into foreclosure twice as often as loans backed by the GSEs.

""Private market players, from brokers to mortgage lenders to Wall Street, created a lending pipeline typified by risky, abusive, and unfair practices,"" said John Taylor, president and CEO of NCRC. ""It is a shameful condition that borrowing while black or Latino remains a hazard in this country.""

In its study, NCRC used regression analysis to examine a statistical sampling of loans in the Washington, D.C. area. The findings showed that Latinos were 70 percent more likely and African Americans 80 percent more likely than their white counterparts to receive a subprime loan. Additionally, the analysis found that African Americans were almost 20 percent more likely and Latinos 90 percent more likely than their similarly situated white counterparts to go into foreclosure.

Taylor said the ongoing existence of these problems is ""unconscionable."" He said the study demonstrates the need for strong financial reform and the creation of an independent Consumer Financial Protection Agency, as the existing regulators have ""simply failed in their duty to protect American consumers.""