In a report released on July 31, the National Community Reinvestment Coalition (NCRC) finds higher rates of subprime lending among African American and Latino homeowners than among white homeowners of similar income levels in nearly every metropolitan area for which data are available. Contrary to what might be expected, the discrepancies seem to increase as income levels rise.
Using Home Mortgage Disclosure Act (HMDA) data from 2006, the NCRC study finds that in 47% of the metropolitan areas analyzed, low and moderate income African Americans are at least twice as likely to receive high-cost loans as whites in the same income category. Surprisingly, the same is true for 71% of the metropolitan areas when middle and upper income African American and white homeowners are compared. Low and moderate income Latinos are at least twice as likely to take out a subprime home loan as whites in 5% of the metropolitan areas, but the number grows to 23% for higher income homeowners. To the contrary, in most metropolitan areas, Asian borrowers at all income levels are more likely to receive prime loans than are white homeowners.
The report also analyzes lending patterns by census tract and finds that low and moderate income borrowers from minority census tracts (those with a greater than 50% non-white population) are more than twice as likely as those from predominantly white areas to receive high-cost loans in 20% of metro areas; the same is true in 41% of metropolitan areas for middle and upper income borrowers.
NCRC offers several explanations for why the racial discrepancies in high-cost lending patterns seemingly increase with income, including discrimination on the part of market-rate lenders and a targeting of minority customers and communities by those specializing in subprime loans. Among nine policy proposals offered in the report are stepped-up fair lending enforcement and a comprehensive federal anti-predatory lending law.
Income is No Shield Against Racial Differences in Lending II, which includes lending data at the metropolitan level and for rural portions of states where data are available, can be found at: www.ncrc.org/images/stories/pdf/research/income%20is%20no%20shield%20ii.pdf.