|
|
|
|
Press Release April 20, 2000 |
Contact: |
AUSTIN, Texas - Despite a robust economy, Texas low income and
minority borrowers continue to be victims of inequities in the home
purchase and refinance loan market, with higher cost subprime lenders
capturing a disproportionate number of loans in these communities, a
statewide study released today shows.
Judging by the study's findings in Dallas and
Houston, high-cost subprime lenders are making substantial
inroads, particularly in Black communities. In Texas 7.8 percent of
Black borrowers got subprime home purchase loans, compared to only
2.3 percent for White borrowers. The disparities were even stronger
in the refinance market. In 1998, 27 percent of Black borrowers
refinanced their homes through a subprime lender, compared to 15.3
percent for Hispanic borrowers and only 6.3 percent for White
borrowers.
The study by Consumers Union and the Austin Tenants' Council -- "Access to the Dream 2000" -- analyzes data on Texas home mortgage loans for the years 1996 to 1998, the most recent data available.
"There are no excuses," said John Henneberger with the Texas
Community Reinvestment Coalition. "We've been down this road before
and it's a shame that so many lenders still refuse to learn that
there is money to be made in these communities. Because of this, high
cost lenders are filling the void and having a field day."
Added Mary Dulan, fair housing director with the Austin Tenants'
Council: "Subprime loans are designed for people with bad credit, and
it is abusive for lenders to use them indiscriminately to target
citizens with darker skin color or who live in the 'wrong' zip
code."
On the bright side, the study found that some "prime" -- or
conventional -- lenders are developing a strong track record in
minority markets, partly because of a federal law called the
Community Reinvestment Act (CRA). For example, certain depository
institutions or their affiliates covered by CRA -- like Nationsbanc
Mortgage in Houston and Austin -- now have a slightly
higher market share in these neighborhoods than their market share in
the MSA as a whole.
"Ironically, this rather obscure federal law which has been
subjected to attack in Congress by Senator Gramm and others is the
reason why we now see some hope in low-income and minority community
lending," said Rob Schneider, senior staff attorney for the Southwest
Regional Office of Consumers Union.
"There are numerous success stories around our state triggered by
CRA waiting to be emulated by other mainstream lenders with vision,"
added Woody Widrow, a CRA specialist coordinating efforts for TCRC.
"We found successful models across the state that show how, using
CRA, banks and community groups can come together to address
difficult housing and development needs."
Overall, the Texas home loan market grew significantly over the
three-year study period and home purchase and refinance lending
increased among all ethnic groups. However, Black and Hispanic
applicants remained a much smaller proportion of the total applicant
pool relative to their proportion of the population. Compared to
1996, home purchase loans to Hispanic applicants increased 22.6
percent, loans to White applicants increased 21.9 percent, and loans
to Black applicants increased only 19.4 percent.
The highest disparities between home loan denial rates for
minority applicants and White applicants in 1998 appeared in
Austin-San Marcos and Bryan-College Station. The gap between the
races in those markets was only a slight one in 1996.
Other key findings in the report:
· Lenders in low income census tracts are more often than not subprime or manufactured home lenders, whose loans cost more than prime, conforming mortgage loans. Of the ten lenders making the largest number of home purchase loans in low income census tracts, six were manufactured housing lenders. Of the ten lenders making the largest number of home purchase loans to Black applicants in low income tracts statewide, four were manufactured housing lenders, three were subprime lenders, and two were large FHA-program lenders.
· In Dallas, eight of the top ten refinance lenders to Black low income borrowers were subprime lenders, compared to only two for Whites. In Houston, six of the top ten refinance lenders to Blacks in low income areas were subprime, including the two largest.
· Lenders in the manufactured home market -- like Green Tree Financial, Oakwood Acceptance and 21st Century Mortgage -- have a strong presence in low income areas.
"(We) encourage consumers, regulators, policymakers, and lenders
to work together to create a lending environment that ensures all
communities will benefit from the state's strong economy and
burgeoning growth," the report states. Among its recommendations:
· Lenders should increase outreach and marketing efforts to low income and minority communities, and develop home loan programs with flexible underwriting and down payment assistance. They should also invest in community development financial institutions and conduct regular fair lending training and testing for loan officers.
· State policymakers should use the existing loan programs of the Texas Department of Housing and Community Affairs to make home loans to Texas families who are being victimized by the predatory subprime lenders. The state should also establish a guarantee pool for subprime mortgage loans in the housing agency. It should invest state funds and encourage insurance companies to buy low income Texas home loans from responsible lenders in order to allow these lenders to do more affordable housing lending.
· Federal regulators should raise the standard for an "Outstanding" or "Satisfactory" CRA rating and work to ensure that banks with affiliated "subprime" companies act in the best interest of low income communities.
Consumers Union, publisher of
Consumer Reports, is an independent, nonprofit testing and
information organization serving only the consumer. We are a
comprehensive source of unbiased advice about products and services,
personal finance, health nutrition, and other consumer concerns.
Since 1936, our mission has been to test products, inform the public,
and protect consumers.
The Austin Tenants' Council (ATC)
is a nonprofit organization founded in 1973 which provides
counseling, mediation, advocacy and educational services related to
housing discrimination, landlord/tenant education and information,
housing repair are rehabilitation and affordable housing.
The Texas Community Reinvestment
Coalition is a coalition of nonprofit organizations
statewide cooperatively challenging lending discrimination in Texas.
TCRC works to remove the barriers for increased financial
independence which deprive low income consumers and communities of
color equal access to capital and financial services. In addition,
TCRC highlights successful partnership efforts to expand
homeownership and community development activity in all areas of the
state.
Austin: Mary Dolan (512) 474-7007 El Paso: Ray Caballero (915) 545-1227 Houston: Stephan Fairfield (713) 674-0175, ext. 15 Lufkin: Doug Dowler (409) 637-7607 San Antonio: Lawanda Lewis-Miles (210) 733-3247
Big Spring:
Dallas:
Mark Gentry (915) 263-4091
Debra Kroupa (214) 634-3925
Liz Wolff (214) 823-4580
Sherman Roberts (214) 421-5363
Monique Allen (214) 361-9602
Tina Moore (713) 551-8650
Antonia Cahn (713) 641-3462
Tim Hathaway (210) 225-4761
Roger T. Carrillo, AIA, (210) 223-3151
