On Friday, in Los Angeles, the NAACP will file suit against two major banks alleging that they intentionally assigned black customers subprime mortgages while giving whites better rates. According to the Associated Press:

The NAACP is accusing Wells Fargo and HSBC of forcing blacks into subprime mortgages while whites with identical qualifications got lower rates.

Austin Tighe, co-lead counsel for the National Association for the Advancement of Colored People, tells The Associated Press that class-action lawsuits will be filed Friday in federal court in Los Angeles.

Tighe says black homebuyers have been 3 1/2 times more likely to receive a subprime loan than white borrowers, and six times more likely to get a subprime rate when refinancing. He says blacks still were disproportionately steered into subprime loans when their credit scores, income and down payment was equal to those of white homebuyers. Source

The NAACP has previously filed suit against 12 subprime lenders charging that racial discrimination was a factor in determining which clients were offered the lowest rates. A report from the Center for Responsible Lending (CRL) found that blacks were more likely – 31 to 34 percent – to be issued more expensive subprime loans than were whites with equal creditworthiness and credit risk.

Though the Center for Responsible Lending (CRL) has not finished a full analysis of the information, which the Fed collects under the Home Mortgage Disclosure Act (HMDA), an initial review shows that abusive lending patterns continued even though the number of higher-cost mortgages made to all borrowers fell last year. Only about half of the disparity can be explained by differences among borrowers in income, gender and loan-size; by whether a borrower has a co-signer; or by the location of the home.
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"This isn’t just a matter of paying more. These numbers highlight how communities of color are being hit hardest by the foreclosure crisis," said CRL President Michael Calhoun. "Research by CRL and others shows that a high share of these families could have qualified for less expensive loans-loans that would have provided a basis for successful homeownership. Now that dream is being dashed for millions of people who already lagged behind financially." Source

If the NAACP prevails, it will not be the first victory against racially discriminatory lending policies in the Southland. A little more than a decade ago, the Justice Department stepped in:

(CNS)– In a case that brings back the issue of banks and mortgage companies using special criteria that discriminate against the underclass, the U.S. Justice Department “won” a $4 million settlement from a firm doing business in Los Angeles and Orange Counties. Long Beach Mortgage Company, based in the City of Orange, agreed to pay $3 million to 1,200 customers who were overcharged because they were black, latino, elderly or female. It also agreed to put up another $1 million for an educational campaign about legal lending practices. (Ideally, the education campaign should warn people to go elsewhere to find a loan.)

The Justice Department reviewed mortgages made from 1990 through 1994, and found that the company’s loan fees for African Americans, Latinos, the elderly and women included an added fee of up to 12% of the loan amount; an added fee that was not charged to younger white males. The lawsuit represented the first time the Justice Department’s civil rights division took action against a lender based on gender or age bias in loans. Ironically, the Long Beach Mortgage Company claims to be in the business of making loans to people with impaired credit, so they are willing to exploit people who are particularly down-and-out, whose options are limited to start out with. Orange County Register 1996 Source

Is the subprime crisis affecting you or someone you know?

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