Women Targeted for Subprime Mortgages

Black and Latina women are more likely to be steered to high-cost loans.

By Leticia Miranda Sep 02, 2009

September 2, 2009

A new report shows that Black and Latina women are more likely than men to be steered towards high-cost mortgage loans. They are also 2.5 times more likely than middle- and upper-class white women to receive a costly loan.

The report, “Assessing the Double Burden: Racial and Gender Disparities in Mortgage Lending,” shows that in almost 100 major U.S. cities, the racial and gender disparities in mortgage lending actually grow as Black and Latina women’s income levels rise. Middle- and upper-class Black women were found to be at least twice as likely as white women to receive high-cost loans in more than 84 percent of the cities.

Raleigh-Cary, North Carolina, ranked the highest in disparate lending practices based on race and gender. Minneapolis-St. Paul, Minnesota, and Bloomington, Wisconsin, both ranked at number two.

“These are people who have played by the rules, went to good schools, got good-paying jobs, and yet none of this exempted them from discriminatory and predatory lending practices,” said Avis Jones-DeWeever, director of the Research, Public Policy, and Information Center at the National Council on Negro Women.

The report was a joint project of the National Council on Negro Women and the National Community Reinvestment Coalition, a group of community organizations advocating for better banking services. It is the first in a series investigating the discriminatory racial and gender practices in home lending.

According to the report, most of the women of color applying for home loans had good credit, but they were still the most likely to be steered into high-cost, adjustable-rate mortgages, a type of subprime loan where the interest rate can be adjusted, sending monthly payments through the roof. The Federal Reserve Board estimated that 28 percent of these subprime loans were seriously delinquent by May 2008 and are now in foreclosure because they were badly written, with hefty prepayment penalties. Communities of color can expect to lose between $164 billion and $213 billion during the next eight years because of these loans, the report shows.

“Most people losing their homes have lost all their wealth and savings. And, they’ve lost their credit score, which is used to get insurance and sometimes as a background check for a job,” said Jim Carr, chief operating officer of the National Community Reinvestment Coalition.

This could lead to the loss off roughly one-third of Black middle-class wealth, which would have a major impact on not only individual families, but extended families who rely on their middle-class relatives for financial support.

The two organizations behind the report are calling on Congress and President Obama to pass the Community Reinvestment Modernization Act, which would regulate all loaning institutions on discriminatory and predatory lending practices. They are also calling for the modification of the Bankruptcy Bill to cover borrowers with only one home loan rather than borrowers with two or three, who are mostly middle- and upper-income white borrowers.