The NAACP is accusing Wells Fargo and HSBC of forcing blacks into subprime mortgages while whites with identical qualifications got lower rates.
Class-action lawsuits will be filed against the banks Friday in federal court in Los Angeles, Austin Tighe, co-lead counsel for the National Association for the Advancement of Colored People, told The Associated Press.
Black homebuyers have been 3 1/2 times more likely to receive a subprime loan than white borrowers, and six times more likely to get a subprime rate when refinancing, Tighe said. Blacks still were disproportionately steered into subprime loans when their credit scores, income and down payment were equal to those of white homebuyers, he said.
Both Wells Fargo & Co. and HSBC are receiving federal bailout funds. Messages left after hours with the banks were not immediately returned.
Amara Weaver of Milwaukee bought her first home in 1984, receiving a 6.25 percent fixed-rate mortgage. She says she had a steady job as a human resources director for a social services agency, never missed a mortgage payment and maintained excellent credit.
In 2004, she wanted to buy the house next door for her son to live in. She said the bank promised her a low fixed rate for a $40,000 loan, but at the closing, when reading the fine print, she noticed that the rate was actually 11 percent.
"I was blown away," said Weaver, an NAACP member. "I didn't have any choice (but to sign) ... it made me feel violated."
Similar NAACP lawsuits are pending against a dozen other subprime lenders.
"This is systematic, institutionalized racism," Tighe said. "Once you take out factors relative to income and credit risk, the only difference between the borrowers is the color of their skin."
Tighe estimated that "tens of thousands" of blacks had been forced into bad loans, but said it was difficult to gauge the scope of the problem because banks keep much of their internal data private. The lawsuits could force banks to divulge closely guarded information, such as how banks can determine the race of a loan applicant and how federal bailout funds are being spent.
The NAACP is seeking reforms from the banks such as increased transparency in the loan process, educational outreach and internal training.
1 comment:
Good for the NAACP. I placed a down payment of $18,0000 on a $186,000 mortage for a townhome in 2001. With good credit, having owned and paid for previous homes and a government employee for over 30 years and an annual salary over $100,000, I could only get a 9% mortgage from Wells Fargo. Despite making all my payments on time, Wells Fargo incresed my mortgage to 11 or 12% in 2006. I thought it strange at the time and I now realize I was had by Wells Fargo which has claimed for years to support loans to minority communities - apparently at much higher interest rates. God bless the NAACP.
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