What's behind your mortgage rate - 3.22.2007.2

Continued from part 1...

The fact is that there is a massive bias out there that no one wants to address. In 2005, it was found that 71% that earned 153,000 dollars or more had high mortgage rates as opposed to 9.4%
of Whites. For Black Americans and Hispanic/Latino Americans that earned between $92,000 and $132,000 (hardly a low income and indicating steady work habits I believe), 70% paid a high interest rate vs. 17% of Whites in the same bracket. You may wonder where these rates might be at, perhaps a small town in an isolated or economically challenged portion of the nation? Actually these are figures for the greater Boston area.

In fact the system is so skewed that when an experiment was conducted in that area with a White and an African American potential homebuyer the results were consistent to the above. The fact that the White homebuyer had a lower credit score and lower income, indicating greater risk which should guarantee a higher rate, had no reflection in the rate received. Does your face feel red, because mine feels like it was just slapped.

So given the unspoken fact that a minority citizen will be forced to pay a higher mortgage rate in the best of situations on average, it’s no surprise that many are facing the loss of their homes due to sub-prime mortgages today. That verges on the criminal if you ask me. Lenders are supposed to know better. They are supposed to evaluate the risks involved and the potential impact higher rates can have on the potential homeowner. They are supposed to follow one of the guiding principles of all investments – the ‘best man’ rule. That is essentially placing yourself in the clients position and acting in the best interest given the higher advantage the professional has versus the common person. While I have no doubt some have, the above data (that I have no doubt can easily be found and reproduced around the nation) indicates to me that many used this educated position to reap profit for themselves.

Yet not a word is mentioned on this. Millions are being systematically abused, stripped of funds they should have, stressed with the threat of losing the home their family lives in; and as a by-product contributing to the potential for severe economic consequences they may not fully understand. As regulators face Congress explaining why such bad loans were made, I have yet to hear one question to ask why there is such an extreme disparity. I have yet to hear why this situation was allowed to become so extreme.

And it won’t be asked. Because if it were Wall Street could not deny that they are ‘taking money from widows and orphans.”

This is what I think, what do you think?