Why Blacks and Hispanics Have Such Expensive Mortgages
High-cost lenders are targeting these communities, preventing them from building wealth to pass on to their children.
Why are blacks and Hispanics targeted with these risk financial products? Perhaps these differences stem not from the borrowers’ race but from their worse financial circumstances, a reason some would say justifies the higher rates. Not the case, according to a new study from the National Bureau of Economic Research, which finds that race and ethnicity matter substantially on their own.
.. According to them, even after controlling for general risk considerations, such as credit score, loan-to-value ratio, subordinate liens, and debt-to-income ratios, Hispanic Americans are 78 percent more likely to be given a high-cost mortgage, and black Americans are 105 percent more likely.
.. Why are African American and Hispanic borrowers ending up at the lenders who will charge them the most? High-cost lenders are much more aggressive in minority markets, the researchers say, which increases such borrowers’ exposure to these pricier loans.
.. Prior research has found that members of these minority groups are less likely to comparison shop for mortgage products, which in turn increases the chances that they’ll wind up with the first offer they receive, and those offers tend to be expensive ones.
.. Among their recommendations for decreasing the racial inequities in the mortgage lending market, the researchers suggest focusing on the way lenders do business, specifically ending the division of major lenders’ subsidiaries into “prime” and “subprime” entities, which can unfairly channel minorities into riskier, more expensive loans for no good reason.