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A study of home mortgage lending
in 1999 in the New York metropolitan area just released by the Justice
Action Center at New York Law School and published in the New York
Law School Journal of Human Rights indicates that residents of minority
neighborhoods were five times as likely to receive a subprime home
mortgage loan than residents of white neighborhoods. Residents
of low-income neighborhoods were nearly four times as likely to
receive a subprime loan than residents of upper-income neighborhoods.
"Subprime" loans are loans made to persons with
less than perfect credit and generally cost more to the borrower.
Professor Richard Marsico, author
of the study, which is the second in a series of annual reports
on home mortgage lending in New York City, Westchester, Putnam,
and Rockland, stated, "These results raise a red flag for government
regulators and consumer advocates because many subprime loans are
predatory, imposing hidden and burdensome terms and fees on vulnerable
borrowers. The data show that minorities and low-income persons
are being targeted for these loans, threatening their homes and
neighborhoods."Within the past year, consumer advocates and
state and federal regulators and legislators have worked to curtail
abusive lending practices. The New York State Banking Department
issued regulations governing "high cost" mortgage loans,
the New York State Assembly passed legislation meant to curtail
abusive lending practices, the Federal Reserve is now contemplating
regulatory changes that would tighten its oversight of abusive lending,
and the federal banking regulatory agencies have announced that
banks that engage in predatory lending practices will have their
community lending ratings downgraded. According to Professor
Marsico, "The results of this study vindicate these efforts
to crack down on predatory lending and the continued vigilance of
community advocates to monitor and oppose predatory lending practices."
The Study also analyzes the lending
records of the 152 lenders that made at least 30 home mortgage loans
in the metropolitan area in 1999 among four "subject communities":
minority neighborhoods; minority persons; low-income neighborhoods;
and low-income persons. The Study ranks these lenders based
on their lending records in these communities. The Study found
that more than one-third, or 56 of the 152 lenders had a poor lending
record in at least one subject community, 22 lenders had a poor
lending record in two or more communities, and 28 lenders made no
loans in at least one subject community. Of these 56 lenders
with poor records, 34 are banks subject to the Federal Community
Reinvestment Act, which requires banks to meet the credit needs
of their entire communities, including low-income neighborhoods.
Despite these poor lending records, all of these banks received
at least satisfactory ratings in their most recent CRA evaluations
by the federal banking agencies.
The Study contains a wealth of
additional information about residential real estate lending and
conventional home mortgage lending between 1998 and 1999 in the
New York Metropolitan Area:
- Residential real estate lending
to Latinos increased 23 percent but decreased for African-Americans,
Asians, Native Americans, and Whites;
- Conventional home mortgage
lending to minorities and whites increased;
- Conventional home mortgage
lending increases to Asians, Latinos, and Native Americans were
greater than the increase to Whites, while the increase to African-Americans
was lower than the increase to Whites;
- Residential real estate lending
increased in white and upper-income neighborhoods but decreased
in minority and low-income neighborhoorhoods;
- Conventional home mortgage
lending increased in minority and white neighborhoods and low-income
and upper-income neighborhoods, but increases in white neighborhoods
and upper-income neighborhoods were far greater than increases
in minority and low-income neighborhoods;
- Lenders rejected residential
real estate loan applications from African-Americans 1.6 times
more frequently than whites;
- Lenders rejected conventional
home mortgage loan applications from African-Americans twice
as frequently as applications from whites, from Native Americans
1.7 times as frequently as from whites; and from Latinos 1.6
times as frequently as from whites;
- Lenders rejected residential
real estate loan applications for property in predominantly
minority neighborhoods 1.5 times more frequently than for property
in predominantly white neighborhoods; and
- Lenders rejected conventional
home mortgage loan applications for property in predominantly
minority neighborhoods 1.9 times more frequently as applications
for property in predominantly white neighborhoods;
For more information or a copy
of the Study, contact Professor Richard Marsico, New York Law School,
47 Worth St., New York, NY 10013 (212) 431-2180, rmarsico@nyls.edu.
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