Real Estate & Property Law
Reports: Lax Regulators Let Lenders Illegally Target Racial Minorities
Posted Jun 13, 2007 5:20 PM CDT
By Martha Neil
Statistical studies have shown for several years that so-called subprime mortgage lenders apparently targeted racial minority groups for home loans with unfavorable terms. However, government regulators reportedly stood by and did nothing to stop them from violating numerous laws including fair-lending rules against redlining. Now, as the real estate market slows down, these same borrowers are disproportionately facing foreclosures, due at least in part to the more onerous terms of their loans.
Statistics show minority borrowers were steered into subprime loans, while whites with similar financial profiles got standard mortgages with more favorable terms, such as fixed interest rates, according to Bloomberg. Meanwhile, although several potential lending rule violation cases based on Federal Reserve statistics have been referred to the Justice Department for possible prosecution, none of the five federal agencies responsible for overseeing home mortgage lenders has reported enforcement action based on the data, the article says.
Government officials and lenders say the data is not clearcut. However, consumer advocates contend otherwise and members of Congress are concerned about the situation.
Even if discrimination can't be shown in individual cases "There are huge inequities in our society and it is incumbent upon bank regulators to battle them,'' said Alys Cohen, an attorney at the National Consumer Law Center in Washington. ``I don't see any evidence that they are doing that," she tells Reuters.
"There is enough smoke here for us to either conclude that there is a fire, or for us to investigate to determine whether there is fire,'' says Rep. Al Green, D-Tex., who is a member of the House Financial Services Committee. "We absolutely must do something.''