A good credit score did not protect Latino and black borrowers

Discussion in 'Politics' started by Ricter, Jan 20, 2012.

  1. Ricter


    "A good credit score did not protect Latino and black borrowers
    By Algernon Austin | January 19, 2012

    "In recent years, Latino and African American consumers with good credit scores of 660* and higher have too often ended up with high interest rate mortgages, mortgages which are supposed to go to risky borrowers. These higher-rate mortgages increased the likelihood of foreclosure among Latinos and blacks. The higher foreclosure rates of these groups help explain why Latinos and blacks have seen such dramatic declines in wealth [link].

    "From 2004 to 2008, only 6.2 percent of white borrowers with credit scores of 660 and above ended up with higher-rate mortgages. Latinos and blacks with good credit scores, however, were three times as likely to end up with higher-rate mortgages.

    "Borrowers of all races suffered from the anything-goes attitude of the housing boom. The Wall Street Journal has reported [link] that more than half of high interest rate loans during the peak years of the boom went to borrowers who should have qualified for prime mortgages. The data also suggests that Latinos and blacks with good credit were especially at risk for ending up with higher-rate mortgages.

    "Discriminatory housing practices are one reason why our country needs a strong Consumer Financial Protection Bureau. A powerful CFPB helps make sure that everyone is treated equally and fairly by the financial services industry.

    <img src="http://www.epi.org/m/?src=http://www.epi.org/files/2011/Snapshot_higher-rate-mortgages_main.png&w=608">

    " *The Fair Isaac Corporation—the company that created the FICO score—classifies scores of 660 and above as “good.”

  2. Ahhhh Chooo! :D

    (Oh I must have an allegry to bullshit.)

    There is such a thing call a "thin" credit file. Perhaps some of those 660's had a thin file not the same credit wieghting as a "standard" or "thick" credit file.

    Certain groups of people are more likely to have a thin credit file. According to FICO, creator of the FICO score and FICO Expansion Score, this includes recent immigrants, young adults, people who have recently been divorced or become widows, or people who mainly use cash.
  3. Ricter


    "Perhaps" that's already been taken into account.
  4. No assumptions allowed. :cool:

    Ya think that would have been noted. It's not. Dog ate page two of the article?
  5. Ricter


    Fair enough. Your "perhaps" is not allowed, either.
  6. Tom B

    Tom B

    A credit score is only one factor in determining a loan rate. A borrower's income and down payment are some of the other factors considered. This article does not address these important factors that would impact loan interest rates.
  7. Ricter


    Good point. Lots of factors pertain, some for, some against, some a "wash".
  8. I fault the banks for agreeing to this extortion.

    Absent some kind of industry-wide conspiracy to screw minorities, it made no economic sense for them to gouge certain borrowers. Why? Because those borrowers always had the ability to say "F you" and take their business elsewhere. So what actually happened?

    This is raw data, which the race hustlers always want to use to "prove" discrimination, because raw data can hide a lot. I suspect what happened is these were borrowers who had problems in their applications and knew no one else would lend to them, or, maybe even more likely, the credit data entered into the system was bogus. In other words, the mortgage broker made up enough stuff to get them a loan but charged them extra, both parties knowing they didn't have an option.
  9. Ricter


    Unfortunately, "I suspect" is another way of saying, "perhaps", which Nutmeg indicates is not allowed. But, should we allow this factor, I suspect ; ) that it's a "wash" factor.
  10. Some observers have argued that minority borrowers and neighborhoods were targeted for
    expensive credit in 2004-06, the peak period for subprime lending. To investigate this
    claim, we take advantage of a new data set that merges demographic information on
    subprime borrowers with information on the mortgages they took out. In a sample of
    more than 75,000 adjustable-rate mortgages, we find no evidence of adverse pricing by
    race, ethnicity, or gender in either the initial rate or the reset margin. Indeed, if any
    pricing differential exists, minority borrowers appear to pay slightly lower rates, as do
    those borrowers in Zip codes with a larger percentage of black or Hispanic residents or a
    higher unemployment rate. Mortgage rates are also lower in locations that previously had
    higher rates of house price appreciation. These results suggest some economies of scale in
    subprime lending. Yet there are important caveats: we are unable to measure points and
    fees at loan origination, and the data do not indicate whether borrowers might have
    qualified for less expensive conforming mortgages.

    #10     Jan 20, 2012