Race-Based Lending Gap

By: Philip Stewart Email
By: Philip Stewart Email

July 12, 2007

Charlottesville and Durham, North Carolina are ranked as the worst cities for high-cost loans to African-Americans. The numbers show they are paying higher interest rates when compared to whites. Several local groups say that's not only unfair, but illegal.

According to the National Community Reinvestment Coalition, in Charlottesville African-Americans are almost four times as likely to get a high-rate loan on a home, than whites. The city is ranked number one in the country for race-based mortgage gaps.

"As opposed to all the number one lists Charlottesville has been on, this is one we need to get off of as soon as possible," said Karen Reifenberger, with the Piedmont Housing Alliance.

"There's a problem," said Karen Waters, with the Quality Community Council. "I'm not sure where the problem lies, I'm not as familiar with the system that's involved with making these loans, but there certainly is a problem."

High-rate loans are those with mortgage rates that are significantly higher than the national average.

A similar study released in 2003 found that African-Americans still got a higher rate, even if they had the same income and same credit score as their white counterparts.

"African-Americans are still getting way more high-cost loans than similarly situated whites," explained Reifenberger.

Critics of the study released this week say the report focuses on race instead of the factors lenders consider, like borrowers' debt levels and the amount of their down payment.

But others think the numbers speak for themselves.

"At the end of the day what the study says is that access to the American dream here in Charlottesville is not equal," said Waters.

And while the ranking is not a positive one, some are hoping it will be a wake up call to borrowers and lenders.

"We're really pleased that the study has come out to sort of demonstrate some of the things we've been saying all along," said Waters.

Reifenberger suggested that borrowers work with a housing counselor, so they don't end up in a position where payment is something you can't afford. She also recommended shopping around, adding that borrowers don't have to get loans locally.

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