The U.S. Department of Housing and Urban Development (HUD) put out a press release yesterday detailing a settlement they've reached with a mortgage lender, called MortgageIT, Inc. The release and attached Conciliation Agreement depict a consistent trend of race-based discrimination woven throughout the mortgage loan process.
From the release:
A HUD review of MortgageIT’s 2007 and 2008 internal loan data alleged that African American and Hispanic borrowers paid APRs [Annual Percentage Rates] that were eight to ten basis points higher, on average than similarly-situated white borrowers. In addition, HUD alleged that African American borrowers were 65 percent and Hispanic borrowers 72 percent more likely to receive higher priced loans than similarly-situated white borrowers, African American and Hispanic borrowers also allegedly paid, on average, $707 and $906 more in fees, respectively. HUD also alleged that African-American applicants were 45 percent more likely to be denied a mortgage loan than similarly-situated white borrowers. Hispanic applicants were allegedly 35 percent more likely to be denied.
To summarize, black and Latino borrowers, who were in roughly equivalent financial situations, were allegedly charged more up front in fees than white borrowers, given less favorable loan terms, and sometimes denied a loan altogether. The agreement notes that in 9 percent of cases with a black borrower and 15 percent of cases with a Latino/Hispanic borrower, the borrower paid $5000 or more in excess fees (that is, above that which a similarly-situated white person would have paid). The settlement does not fully quantify the magnitude of economic impact these practices had. For example, did borrowers denied a loan based on their race go on to successfully get loans elsewhere? What impact did paying an extra $700 to $5000 in fees have on a family's long-term financial stability?