From 2004 to 2008, only 6.2 percent of white borrowers with credit scores of 660 and above ended up with higher-rate mortgages. Latinos and blacks with good credit scores, however, were three times as likely to end up with higher-rate mortgages, according to an analysis published Thursday by Algernon Austin, director of the Economic Policy Institute’s Race, Ethnicity, and the Economy program.
The Fair Isaac Corporation–the company that created the FICO score–classifies scores of 660 and above as “good,” but Austin explains that black and Latino borrowers with a credit score of 660+ still received higher interest rate loans that resulted in higher foreclosure rates. “Higher foreclosure rates of these groups help explain why Latinos and blacks have seen such dramatic declines in wealth,” Austin wrote in his analysis available on EPI’s site.
“Discriminatory housing practices are one reason why our country needs a strong Consumer Financial Protection Bureau,” Austin went on to explain. “A powerful CFPB helps make sure that everyone is treated equally and fairly by the financial services industry.”
Colorlines.com’s editor Kai Wright points out that been a recurring claim since the beginning of the housing crisis that people who didn’t deserve loans got them. “The not-so-subtext of that has been an attack on government programs that encouraged lending to black and Latino borrowers. The claim has been demonstrably false from the start, though it still gets repeated without challenge in mainstream media.”
“This study is but the latest to make the point clear: We’re in this crisis because the financial sector deliberately preyed upon borrowers of color, who were left vulnerable after being locked out of the legitimate credit market for generations,” Wright went on to say.