By Emma Fidel
July 19, 2012
Black and Latino homeowners received significantly more government-backed loans than white homeowners in 2010, suggesting that racial discrimination persists in the mortgage industry, according to a joint report by seven community development advocacy groups.
Black and Latino borrowers and people buying homes in predominantly non-white communities received “disproportionately fewer conventional mortgages” than white borrowers, the study found. Residents of those minority neighborhoods were 2.1 times more likely on average to receive Federal Housing Administration and other government-backed mortgages as residents of mostly white communities.
“Although FHA lending is a vital source of credit for borrowers of color, the disproportionate prevalence of FHA loans in communities of color raises fair lending flags,” the authors wrote in their sixth annual report, “Paying More for the American Dream.”
Black and Latino borrowers were, respectively, 2.1 and 1.8 times more likely on average to receive government-backed mortgages than white borrowers in the seven cities studied: Boston; Chicago; Cleveland; Los Angeles; New York; Charlotte, North Carolina and Rochester, New York. Los Angeles had the highest discrepancies for residents of non-white communities while New York had the highest discrepancies for Latino and black borrowers.
Government-backed mortgages are insured by the FHA or guaranteed by the Department of Veterans Affairs. They often require smaller down payments and lower credit scores, but can be more expensive and take longer to get approved, according to the study.
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