Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages

African-Americans and Latinos get high-priced subprime mortgages far more frequently than whites -- even when they are equally qualified, according to a groundbreaking new study from CRL.Lenders say they charge more because African-Americans and Latinos on average have shakier credit histories, which makes lending to them riskier. But that explanation is simply wrong.In the most extensive study of its kind, CRL found that African-Americans and Latinos are commonly almost a third more likely to get a high-priced loan than white borrowers with the same credit scores. The study examined 50,000 subprime loans. A House subcommittee is now discussing whether to pass a weak bill favored by industry or strong protections that would stop predatory lending practices like this in the vast sub-prime mortgage market, where people with blemished credit borrow and most mortgage abuses occur

Borrowers in Higher Minority Areas More Likely to Receive Prepayment Penalties on Subprime Loans

For years, subprime lenders have defended prepayment penalties by claiming that borrowers with penalties get a lower interest rate. Now, groundbreaking research by CRL shows that borrowers get no rate benefits with subprime prepayment penalties -- and that residents in minority neighborhoods have much greater odds of receiving such penalties.Prepayment penalties (fees for paying off mortgage loans early) are almost nonexistent in the prime mortgage market, but occur in up to 80% of subprime mortgages. The costs of these fees can prevent refinancing or strip equity, widening an already vast wealth and homeownership gap between white families and African-American and Latino families