A coalition of community organizations has issued a report stating there was evidence of a ‘two-tiered mortgage market characterized by high rates of government-backed loans made both to borrowers in communities of color and to borrowers of color.’
According to the report – titled ‘Paying More for the American Dream VI: Racial Disparities in FHA/VA Lending’ – government-backed loans made up three of every four home-purchase loans made to African-American borrowers and two of three loans made to Hispanic borrowers. African-American and Hispanic homeowners received government-backed refinance loans 3.5 and 2.1 times more often than did white homeowners, respectively.
Furthermore, the report finds that government-backed loans made up almost 67% of the home-purchase loans made in predominantly non-white communities, while government-backed loans made up 27% of the refinance loans made in these communities.Â
‘These patterns are symptoms of a deeper problem: the lack of access to prime conventional loans by borrowers and neighborhoods of color – in other words, ongoing redlining,’ says Spencer Cowan, vice president of the Chicago-based Woodstock Institute.
The report focused on lending patterns in Boston; Charlotte, N.C.; Chicago; Cleveland; Los Angeles; New York City;and Rochester, N.Y. Los Angeles was found to have the highest discrepancies for residents of non-white communities, while New York City had the highest discrepancies for African-American and Hispanic borrowers.
‘These disparities are very troubling,’ says Barbara VanKerkhove, researcher and policy analyst at the Empire Justice Center, based in Rochester, N.Y. ‘Some people who were eligible for a more affordable conventional loan may have been steered into an Federal Housing Administration loan based on their race or where they live.’
The report was created in collaboration by the Woodstock Institute, the Empire Justice Center, the Neighborhood Economic Development Advocacy Project, Reinvestment Partners, the California Reinvestment Coalition, the Massachusetts Affordable Housing Alliance and the Ohio Fair Lending Coalition.