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Predatory Lending Continues -- Blacks and Latinos Are Three Times More Likely to Get Higher-Rate Mortgages

Predatory Lending Continues

A major qualifying factor for purchasing a home is credit score. According to the Fair Isaac Corporation, the company that created the FICO credit score, a credit rating of 660 and above is considered good. The better the credit score, the better the interest rate. However, research shows this guideline is not being applied equally, especially among African Americans and Latinos.

The Facts

Theoretically, higher interest rate mortgages are only supposed to go to risky borrowers, those with low credit scores. However, between 2004 and 2008, 21.4 percent of African Americans with credit scores of 660 and above ended up with higher interest rate mortgages, compared to only 6.2 percent of whites with the same score. Latinos also fared poorly at 19.2 percent.

Predatory lending apparently continues as African Americans and Latinos are three times more likely to get higher-rate mortgages. In fact, according to the Wall Street Journal, during this same period, more than half of high interest rate loans were given to borrowers who should have qualified for prime mortgage rates. The result is a catch 22; the increased interest rates charged to African Americans and Latinos has also created a higher foreclosure rate among African Americans and Latinos.

What Is The Solution?

The solution seems to lie with stronger oversight by the government's Consumer Financial Protection Bureau. Their job is to protect consumers by ensuring that banks and other lending institutions treat all consumers equally and fairly. Although many Americans are resistant to more government intervention, this is one case where more is better---for all.


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