Minorities disproportionately denied mortgages

Kevin Rademacher

Thursday, Oct. 14, 2004 | 11:12 a.m.

Blacks and Hispanics seeking conventional home mortgages in the Las Vegas metropolitan area are denied nearly twice as often as white borrowers, a study released today said.

In 2003, black borrowers were denied for conventional loans at a rate of 22.3 percent, and Hispanic borrowers were denied at a rate of 21.2 percent, said the study from the Washington-based Association of Community Organizations for Reform Now (ACORN).

White borrowers were denied at a rate of 12 percent, the study said.

The Las Vegas area numbers were better than the national denial rates for blacks (27.6 percent) and whites (12.7 percent), but Hispanic borrowers fared slightly better outside of Las Vegas with a denial rate of 20.8 percent.

Will Ward, who organized a Las Vegas ACORN office last month, said the lack of conventional loan options for minorities in Las Vegas leaves open rampant opportunities for unscrupulous lenders charging excessive fees or interest rates.

"If they don't provide prime loans for these minority communities, that void will be filled by predatory lenders," Ward said.

The 2003 study results are slightly worse than the results ACORN reported for the Las Vegas area in 2002 when blacks were denied at a rate of 21 percent and Hispanics at a rate of 20 percent. However, white borrowers in 2002 also were denied less often at a 10.5 percent rate.

Linda Williams, president of the Nevada Association of Mortgage Brokers and branch manager BNC Mortgage Inc. in Las Vegas, said one reason for the denial rates could be that a disproportionate number of minority borrowers do not fit the standard profiles for conventional mortgage loans. If those borrowers receive a high portion of their salary in unreported cash, such as tips, they would not qualify for conventional loans that allow only 28 percent of their income to be consumed by mortgage payments.

Similarly, many minority borrowers may lack any credit at all -- good or bad, Williams said.

"You have to have credit or have money," Williams said, adding that banks -- typically the leading source of conventional loans -- often do not have loans with the flexibility to handle those consumers. That void, she said, is often filled with mortgage brokers that offer a wider array of options in their loans, such as loans that are not based on reported income or allow higher debt levels.

Ward, however, said the notion that an entire segment of the community should be forced into products that are often more expensive is "completely absurd."

"(Banks) need to develop products to fit that constituency," he said.

Gail Burks, chief executive of the Nevada Fair Housing Center, agreed.

"If they are taking deposits from that community, they have to offer credit to that community," she said.

Burks said the rush of bank mergers in the late 1990s and early 2000s gave rise to a cookie-cutter approach to loan options. Those new options are designed to reach as many consumers as possible nationally or regionally, leaving out the nuances that make up particular communities.

"The problem is when institutions have no control over the markets they serve," she said, adding however that education also is a key factor in getting people into good mortgages.

Executives with Wells Fargo Bank and Bank of America declined to comment until they had reviewed the study.

Others also said that educating potential home buyers to issues such as credit scores and other loan details -- such as interest rates, points and fees -- are important to getting minorities approved.

"Loan counseling and financial literacy, that's a piece of the puzzle," Ward said.

Other details of the 2003 study also showed that upper-income minorities were denied for conventional loans at a higher rate (19.9 percent for blacks and 17.4 percent for Hispanics) than whites of similar income levels (10.4 percent).

Also, while ACORN statistics showed that Hispanics make up 20.6 percent of the Las Vegas-area population, they received just 9.1 percent of all conventional loan originations. Blacks -- 7.8 percent of the populations -- received just 3.5 percent of the loans, ACORN said.