A good credit score did not protect Latino and black borrowers
- Thread starter Ricter
- Start date
Former Chase Banker Admits His Bank Pushed Minorities Into Subprime Mortgage Loans
One of the most pernicious practices in which the nationâ biggest banks engaged during the lead up to the financial crisis was pushing minority borrowers into subprime loans, even when many of them qualified for prime loans. Wells Fargo had perhaps the most horrifying practices in this department, calling the subprime loans that they pushed in poor, black neighborhoods âghetto loans.â
This rampant predatory lending helped inflate the housing bubble; a Center for American Progress investigation actually found huge racial disparities in lending at the big banks that wound up getting bailed out, with minority borrowers far more likely to receive high-priced loans.
One former banker for Chase â James Theckston â told the New York Timesâ Nick Kristof that not only did his bank push minority borrowers into higher-priced loans, but senior executives then tried to cover up the racial disparity in their banksâ lending:
One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers â those with less education, without previous mortgage experience, or without fluent English â and nudged them toward subprime loans.
These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.
âThe bigwigs of the corporations knew this, but they figured weâre going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas,â Theckston explained.
In 2006, Chase made high-price loans to 16.4 percent of white borrowers, while nearly half of black borrowers and more than one-third of Hispanic borrowers received high-price loans. These disparities help explain why, according to a new report from the Center on Responsible Lending, Latinos and blacks are twice as likely to have been impacted by the housing crisis as whites. In fact, âapproximately one quarter of all Latino and African-American borrowers have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers.â
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The Politburo really does need SOPA.
One of the most pernicious practices in which the nationâ biggest banks engaged during the lead up to the financial crisis was pushing minority borrowers into subprime loans, even when many of them qualified for prime loans. Wells Fargo had perhaps the most horrifying practices in this department, calling the subprime loans that they pushed in poor, black neighborhoods âghetto loans.â
This rampant predatory lending helped inflate the housing bubble; a Center for American Progress investigation actually found huge racial disparities in lending at the big banks that wound up getting bailed out, with minority borrowers far more likely to receive high-priced loans.
One former banker for Chase â James Theckston â told the New York Timesâ Nick Kristof that not only did his bank push minority borrowers into higher-priced loans, but senior executives then tried to cover up the racial disparity in their banksâ lending:
One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers â those with less education, without previous mortgage experience, or without fluent English â and nudged them toward subprime loans.
These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.
âThe bigwigs of the corporations knew this, but they figured weâre going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas,â Theckston explained.
In 2006, Chase made high-price loans to 16.4 percent of white borrowers, while nearly half of black borrowers and more than one-third of Hispanic borrowers received high-price loans. These disparities help explain why, according to a new report from the Center on Responsible Lending, Latinos and blacks are twice as likely to have been impacted by the housing crisis as whites. In fact, âapproximately one quarter of all Latino and African-American borrowers have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers.â
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The Politburo really does need SOPA.
These less savvy borrowers were disproportionately blacks and Latinos
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Uh oh. We're getting off track here.First we have race, now we are heading down the path of "savvy".
We need mortgage financing from "Scouts Honor Savings and Loan".
OH, so we have smart money and dumb money? And smart customers and dumb customers. But it helps if we introduce race into the contest of a "sucker born every minute."
Sumbody do sumpin.
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Uh oh. We're getting off track here.First we have race, now we are heading down the path of "savvy".
We need mortgage financing from "Scouts Honor Savings and Loan".
OH, so we have smart money and dumb money? And smart customers and dumb customers. But it helps if we introduce race into the contest of a "sucker born every minute."
Sumbody do sumpin.
Down payments were likely different. Lower the down payment the higher the rate.
1) Suppose the author has one point - to advocate for a consumer protection bureau. Next the author chooses the fico score to prove his point.
2) The mortgage industry operates on generating the most profit, commission on their products, they sell with the principle of "We don't give you a loan, you accept a loan".
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Further more ; a subprime loan is just what is it, a high rate of default which based on current statistics in foreclosures were self fulfillin, hence is the mortgage lending model wrong?
Is the tail wagging the dog?
Now I guess the question is, "IF" the minority borrow was offered a prime loan (if qualified) as opposed to the more profitable sub prime packaged to the less "savvy" would the foreclosure rate be less?
I don't think so.
Because we have left out geographic and economic variables.
(and conviently left out white people in the equation who went into foreclosure )
Maybe I'll check the foreclosure rate of white subprime borrowers.
I doubt if he had access to that level of information. If he had he wouldn't have written the article.
They are talking about latino and black people with (the good credit, high income.) So why they are put into higher interest subprime?
"The subprime market also does not seem to distinguish among high- and low-income minority borrowers. High-income Hispanics and blacks are about as likely to receive a higher-priced loan as are low-income Hispanics and blacks. For example, in 2007, 26.8% of loans to low-income Latinos and 26.6% of loans to high-income Latinos were higher priced (Table 6). In contrast, the share of higher-priced loan originations to whites drops rapidly with income, from 16.8% for low-income whites to 7.6% for high-income whites. Consequently, high-income Latinos and blacks are at a greater disadvantage relative to whites than are low-income Latinos and blacks."
http://www.pewhispanic.org/2009/05/12/iv-loans-for-home-purchase-in-2007/
"The subprime market also does not seem to distinguish among high- and low-income minority borrowers. High-income Hispanics and blacks are about as likely to receive a higher-priced loan as are low-income Hispanics and blacks. For example, in 2007, 26.8% of loans to low-income Latinos and 26.6% of loans to high-income Latinos were higher priced (Table 6). In contrast, the share of higher-priced loan originations to whites drops rapidly with income, from 16.8% for low-income whites to 7.6% for high-income whites. Consequently, high-income Latinos and blacks are at a greater disadvantage relative to whites than are low-income Latinos and blacks."
http://www.pewhispanic.org/2009/05/12/iv-loans-for-home-purchase-in-2007/