Was your home loan a good idea? - 3.22.2007.1

So everyone is scared about losing their homes, or the stock market crashing, because of the sub-prime loans made for years. Since the blip in the Dow Jones Index in February, and comments by Mr. Alan Greenspan, there has been constant news about the status of these loans that represent more than a million homes in the nation. And there is good reason to worry.

As teaser rates on mortgages are replaced my adjustable rates, many over 3 points higher than the market rate, late and missed payments are growing. Forclosures are growing and banking institutions of all sizes face drops in profit or worse as the year progresses. The ramifications go on and on. Virtually any nightly news will catch you up on all of this. Of course there are a few ‘minor’ things that are being left out.

By minor I mean minority, and when I say left out I mean overlooked. It’s a situation that is a blatant abuse, in my opinion, that is obvious to anyone that can count to 100. Now I’m sure you are wondering what I am talking about. You didn’t hear anything like this on the evening news, or your favorite cable news channel. That’s because the markets hate to mention an abuse that targets the poor, uneducated, and minorities. It’s like investing money for an elderly widow(er), take their money and you will get sued and lose guaranteed.

Specifically I mean that many sub-prime lenders swooped in on African Americans and Hispanics worse than vulture investors. This isn’t an opinion, though it’s not wholesale fact. I’ll explain.

It’s known, though not officially acknowledged, that an African American or Hispanic will virtually always be given a higher mortgage rate than a White person. To quote Mr. Jim Campen of the University of Massachusetts, “Blacks and Latinos have lower incomes and less wealth, less steady employment and lower credit ratings, so a completely neutral and fair credit-rating system would still give a higher percentage of subprime loans to minorities.”

The statement assumes that both groups are being given higher rates currently, and that the system is unfair or hardly neutral, which Mr. Campen does admit. It relies on the statistics of the census rather than individual data. It’s a great excuse to overlook what sub-prime lenders have done. It gives credibility to why a Black American is 3.8 times more likely to have a higher rate than a White, and 3.6 times more likely for Hispanic/Latinos.

That is both ludicrous and insulting. I am not a general statistic. I deserve better than an assumption that I cannot maintain a job, or that I will be paid less than another man, especially when being considered for a piece of the “American dream.” Loan originators are supposed to evaluate the person, based on the factual data before them. Mr. Campen’s statement seems to clearly state that this doesn’t happen, and you might imagine my shock being underwhelming by this.

Continued in part 2...