HispanicBusiness

SAN FRANCISCO, March 30 /PRNewswire/ -- A just released report on bank lending to minorities in California found that Citigroup, HSBC and Wells Fargo each made home loans that cost African Americans and Latinos more than 2 1/2 times as much as most other bank customers. The report, "Who Really Get Home Loans: Year Eleven" documents a high-priced credit system for minority households in the cities of Fresno, Los Angeles, Oakland, Sacramento and San Diego. The report was compiled by the Bay Area-based California Reinvestment Coalition (CRC).

"What you look like and where you live should not determine whether you get a loan, or how much it costs," said Kevin Stein, CRC's Associate Director. "Citigroup, Countrywide, H&R Block, HSBC, National City, Washington Mutual and Wells Fargo must ensure that every customer has equal access to the lowest cost loan product for which they qualify, and that all loans are priced fairly."

Congresswoman Maxine Waters (202-225-2201) reacted to the report's findings, "CRC's report confirms the disturbing reality that people of color in California continue to find it far more difficult to get bank loans than other prospective borrowers. Many of these borrowers could qualify for a lower cost prime loan with better loan terms if they were given such an option. Clearly, much more work is required to ensure equal access to credit."

California Treasurer Phil Angelides (916-653-4052) added, "California's future economic success depends on taking the high road to prosperity. We must invest in all of our diverse communities, because we will never achieve our full potential if anyone is left behind. Every Californian deserves an equal opportunity to achieve the dream of homeownership."

The CRC report, "Who Really Gets Home Loans: Year Eleven," identifies three key trends:

1. People of Color Pay More. Citigroup, HSBC and Wells Fargo each made loans in California that carried Annual Percentage Rates (APRs) of over 15%, when most bank customers could get a mortgage loan with an APR of 6%. African American borrowers getting a loan from one of the seven corporations analyzed were more than three times as likely as white borrowers to be paying for a higher cost loan. In Los Angeles, higher cost subprime lender Option One Mortgage made 476 loans to Latino borrowers, while its lower cost H&R Block Mortgage affiliate made only 39 loans to Latinos. Option One Mortgage does not offer its best customers a lower cost prime loan.

2. Higher Costs for People of Color Are Not Explained by Income Disparities. Upper-income African American and upper-income Latino borrowers were more likely to be denied for less expensive bank loans than white borrowers who had lower incomes. At the same time, upper-income African Americans and Latinos were 3.9 times and 3.3 times as likely to get higher cost subprime loans as whites with the same income.

3. The Cost to Borrowers of Subprime Lending is High. An interest rate that is higher than the going rate by 3% costs the borrower $541.99 more per month, and $195,117 more in interest payments over the life of the loan. Subprime loans often carry even higher rates. Subprime loans are also more likely to contain harmful loan terms that trap borrowers into high cost loans and strip hard-earned equity from the borrower and the community.

In light of these findings, CRC recommends:

-- Lenders increase the number of branches in underserved neighborhoods and create incentives for loan officers and brokers to offer borrowers the lowest priced loan for which they qualify;

-- Regulators provide more rigorous examination and enforcement of bank lending practices to ensure that all borrowers are treated fairly regardless of the color of their skin; and require banks like Countrywide Bank to reinvest in all local communities where they are located and conducting banking business in order to ensure they are meeting the credit needs of California communities;

-- Policy makers must provide greater protections for California residents in the form of a stronger state anti predatory lending law, and by opposing the federal Ney-Kanjorski bill which protects too little while preempting too much. The Miller-Watt-Frank bill offers a better alternative for consumers as it provides greater rights to borrowers, and it permits state governments to pass stronger anti predatory lending laws with greater protections.

"Red lining is at work here with its whiff of institutionalized racism," said Oakland City Attorney John Russo (510-238-3148) who defended Oakland's anti-predatory lending ordinance before the California Supreme Court in December 2004.

"This report from CRC is welcome here in Fresno," said Edie Jessup of Fresno Metro Ministry (559-485-1416). "It is truly important that financial institutions open full service branches in low-income neighborhoods if they are serious about expanding their market share in emerging communities. Victims of predatory lending are having a difficult time remaining in their homes."

"In a real estate market bulging with equity, the danger to homeowners is cutthroat marketing and lack of transparency by sub prime lenders," said Jim Bliesner, Director of the San Diego City/County Reinvestment Task Force (619-515-6148). "It is good to highlight the offending lenders, and we should discourage homeowners from borrowing from them."

Based on federal Home Mortgage Disclosure Act (HMDA) and state lending data, the report is the eleventh in an annual series of CRC investigations of how California's banks and mortgage companies serve the needs of our state's diverse communities. The report includes detailed lender performance data for each city, and is available from the California Reinvestment Coalition at 415-864-3980, or at http://www.calreinvest.org/.

The California Reinvestment Coalition is a non-profit membership organization of more than 200 nonprofit organizations and public agencies across the state of California. CRC works with community-based organizations to promote the economic revitalization of California's low-income communities and communities of color. CRC promotes increased access to credit for affordable housing and community economic development, and to financial services for these communities. California Reinvestment Coalition

Web site: http://www.calreinvest.org/