Unequal Opportunity Lenders
A new report from the Center for American Progress highlights striking racial disparities in subprime mortgage lending by the nation’s biggest banks. The report, Unequal Opportunity Lenders?, examines lending during 2006 (the last full year before the collapse of the subprime mortgage industry) by the fourteen biggest bank lenders and their current subsidiaries.
It finds that 41.5% of loans to black borrowers and 30.9% of loans to Latino borrowers were high-priced, compared to 17.8% of loans to white borrowers. When the analysis was restricted to borrowers whose incomes were more than double that of the local median income, the disparities were even starker – both high-income blacks and high-income Latinos were approximately three times as likely to get high-priced loans as high-income whites (32.1% and 29.1% vs. 10.5%).
The report gives individual attention to each of the five biggest lenders – Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and PNC Financial Services – and finds substantial racial and ethnic disparities in every case.
It should be noted, however, that two of these banks did not themselves make significant numbers of high-priced loans in 2006, but later acquired major subprime lenders who are counted as their current subsidiaries; this is true of Bank of America (which acquired Countrywide) and PNC (which acquired National City Bank).
Wells Fargo, JPMorgan Chase, and Citigroup have also acquired major subprime lenders since 2006, but each of these three was already a major subprime lender, with substantial racial and ethnic disparities in its lending. In fact, the greatest racial disparities between high-income black and high-income white borrowers were for pre-merger Citigroup (32.9% vs. 7.1%, for a disparity ratio of 4.6) and pre-merger Wells Fargo (26.2% vs. 6.4%, for a disparity ratio of 4.1).
This is hardly a new issue. Last month, when the House Financial Services Committee released a Government Accountability Office report entitled Fair Lending: Data Limitations and the Fragmented U.S. Financial Regulatory Structure Challenge Federal Oversight and Enforcement Efforts, Rep. Luis Guitierrez called it, “one more addition to “the mountain of evidence indicating that Congress needs to act immediately to create an independent consumer protection agency with the focus and the authority to enforce our fair lending laws.”
The new report from the Center of American Progress makes this mountain of evidence even higher.