WASHINGTON, DC - Congressman Melvin Watt called for the end of racial and ethnic disparities in the subprime housing mortgage lending market in a hearing today in the Subcommittee on Financial Institutions and Consumer Credit. The hearing was called to address new loan pricing data reported under the Home Mortgage Disclosure Act (HMDA) that showed that minorities seem to pay higher prices for home mortgage loans.

 

"For most families, purchasing a home is the largest investment they will ever make and can be the biggest factor in wealth accumulation. We cannot continue to ignore the fact that race still plays a significant role in the price consumers pay for home loans. Furthermore, we must hold lenders accountable when they deliberately steer minorities into high cost loans," said Watt.

 

The Home Mortgage Disclosure Act was enacted by Congress in 1975 to gather and make information public about home mortgage loans and lending patterns. In 2002, the Federal Reserve expanded the requirements to include disclosure of pricing, which includes interest rates and fees, for higher priced loans.

 

Last fall, information obtained from HMDA showed that black and Hispanic homebuyers are much more likely to get higher-rate subprime loans. A new study of home mortgage loans by the Center for Responsible Lending matched 50,000 subprime loans from HMDA data with mortgage databases and found that African-Americans and Latinos are 30% more likely get higher-cost loans, even after controlling for credit qualifications and other risk factors.

 

Congressman Watt is a lead sponsor of the Watt-Miller-Frank anti-predatory lending legislation that seeks to eliminate specific abusive lending practices. The legislation is based on the State of North Carolina's predatory lending statute, which is widely considered the model state statute for preventing abusive lending while preserving access to credit.