July 17th, 2007
Omaha got low ranking in mortgage rate fairness
BY STEVE JORDON
WORLD-HERALD STAFF WRITER
A report released Wednesday by a national fair-housing group said Omaha
is among the worst cities in the nation for making higher-rate
mortgage loans to low-income people and to blacks regardless of income.
More than half the loans to Omaha blacks in 2005 were high-cost, the
National Community Reinvestment Coalition of Washington, D.C., said,
compared with one out of five for whites.
The findings were part of a national study of metropolitan areas. The
coalition didn't study Omaha separately or allege that Omaha lenders
discriminate based on race.
But Josh Silver, a vice president of the National Community
Reinvestment Coalition, said that racial discrimination is "an ugly reality" in
lending practices nationally and that predatory lenders target
African-Americans.
Jeffrey Krejci of Lincoln, chairman-elect of the Nebraska Bankers
Association, said that federal regulations guard against racial
discrimination and that bankers are careful to use objective standards to determine
the rates they charge borrowers.
High-rate mortgage lenders have targeted Omahans of any color who have
credit problems and who don't know how to find the best mortgage rates,
said Jerry Dantzler, director of Omaha 100, an Omaha bank consortium
that offers low mortgage rates, mostly to low-income borrowers.
"I'm not surprised at all" that Omaha showed poorly in the national
report, Dantzler said. "We get calls every day from people that have been
taken advantage of. They don't understand banking. They're just happy
to hear that they've been approved for a loan."
That may be true even for minorities who have boosted their incomes, he
said, because they don't want to appear ill-informed when negotiating
a mortgage.
Omaha's history of poverty has produced generations of people who have
not learned how to handle their finances, Dantzler said. Omaha has one
of the highest rates of black poverty in the nation.
Many lenders offer mortgages with higher interest rates — often called
"subprime" loans — to people who have weak credit histories or lower
incomes.
Although an increasing number of those loans have gone bad in the past
year, the lenders pointed out that the delinquency rate is still less
than 15 percent. Lenders say that means more than 85 percent of the
borrowers are able to buy a home, and many of them would not have been able
to do so without subprime loans.
In Wednesday's report, the Washington group analyzed data reported for
2005 by mortgage lenders under the Home Mortgage Disclosure Act. The
report defined high-rate mortgages as at least 3 percentage points higher
than the going rate for U.S. Trea sury securities.
Nationally, the report said, blacks in 171 cities were at least twice
as likely as whites to receive the high loan rates.
For Omaha, the report said 55.6 percent of the mortgage loans to blacks
in 2005 were high-cost, compared with 20.6 percent for whites.
Of mortgages to low- to moderate-income blacks, 63.4 percent were
high-cost, compared with 28.7 percent for whites. For moderate- to
upper-income blacks, 48.7 percent of the mortgages were high-cost, compared with
16.8 percent for whites, the report said.
For all races in Omaha, the report said, 31.7 percent of loans to
lower- and moderate-income people were high-cost, compared with 18.4 percent
for moderate- to upper-income people.
The report calculated the cities' rankings from the disparities in loan
percentages.
Silver, the Washington group's vice president, said the report
indicates that government regulators have not been tough enough on lenders to
end practices that result in minorities and low-income people paying too
much for home loans.
Although the study does not allege that Omaha lenders discriminate
against blacks, he said, " the disparities remain significant and
stubborn."
Regardless of the reasons behind the statistics, Silver said, "Let's
roll up our sleeves and work together on programs that provide more
choice to minority and working-class communities."
The coalition backs federal legislation against predatory lenders and
strengthening regulation of nonbank lenders, he said, as well as
requiring lenders to report more information that could uncover discriminatory
practices.
Silver said the Federal Reserve, using the same data, last year
referred evidence of possible discrimination by 270 lenders to the agencies
that regulate them. So far, he said, the regulators have not settled any
fair-lending cases as a result.
Krejci, of the Nebraska Bankers Association, said the figures used in
the study do not include key factors that determine mortgage rates, such
as the borrower's credit and work history and debt in relation to
income and the value of the home.
"What they're drawing attention to, it needs to be looked at," he said.
"But it's not the whole story. I don't believe that we have
discrimination going on. I think we have the controls in place to prevent it."
Bankers' loan records are "transparent" to government regulators, who
are alert for discrimination in lending and can levy severe penalties,
he said. "They're watching us very closely."
In the coalition's report, Omaha ranked 114th out of 116 metropolitan
areas, or the third-worst, behind Charleston, S.C., and the Stamford,
Conn., area.
Omaha ranked poorly in part because of the statistical methods used in
the analysis. For example, more than 260 metropolitan areas were
excluded from the overall rankings of the 380 studied because too few loans
were made to minorities.
Lincoln ranked 10th-worst in lending to Hispanics but wasn't included
in the overall ranking because there weren't enough loans made to blacks
or Asians.
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