Black Americans and the elderly are more likely to receive higher-cost mortgage loans regardless of their creditworthiness, according to a study released Wednesday.
The National Community Reinvestment Coalition, which includes community advocacy groups, studied lending patterns in 10 large U.S. cities, including Atlanta, Detroit, Los Angeles, New York and Washington, D.C. It looked at consumers' credit scores and demographic and housing market data.
The study found that refinance loans with higher than average interest rates increased as the portion of black residents rose in nine of the 10 cities. Higher-cost refinance loans also climbed when the number of residents over age 65 rose in a community.
In addition, the study said that "subprime" loans for home purchases or refinancing increased as the number of residents with no credit scores rose in a neighborhood.
John Taylor, the coalition's president, said the study pointed to the spread of mortgage brokers who look to offer higher-cost loans.
"What you've seen is full-service banks closing their branches in minority neighborhoods with the vacuum being filled by brokers," he said.
But Wright Andrews, executive director of the Coalition for Fair and Affordable Lending, which represents some subprime lenders, said many factors other than credit scores are used in the mortgage loan process.
Andrews, who said he had not seen the specifics of the study, noted that non-prime lenders consider a borrower's level of debt, documentation of income, cash reserves and other factors. That can present hurdles for minorities who oftentimes won't have the level of assets or income that non-minorities have, he said.
"We abhor discrimination," said Andrews. "With any study like this, you can't simply look at a census tract and credit data. You have to look at the other factors."
James Ballentine, director of community development at the American Bankers Association, said the study points to aggressive marketing efforts by alternative, unregulated lenders that set up shop in minority communities.
"There clearly is a level of trust that must be initiated to indicate to these potential customers that working with regulated lenders is the way to go," Ballentine said.
