Charlottesville MSA apparently is a risky place to get a loan if you’re a minority

Moved from the sideblog category, as it truly deserves to be highlighted.

But the Charlottesville MSA apparently is a risky place to get a loan if you’re a minority. The conversation at cvillenews continues to be interesting. These numbers are shameful, and those who are both responsible and profiting from this to be held publicly accountable.

Any local lenders want to comment? Feel free to use a pseudonym.

Pull the files from the top three local banks (or more), and compare apples to apples on applications – credit scores, income, debt ratios, the whole thing, and report those findings. I am confident that nobody I work with practices these tactics, but I’d sure like to put faces and names to the numbers. There are predatory people in every business, surely, but this scale is shameful and needs to be addressed. Now.

More at Inman (paid subscription required after tomorrow) – interestingly,

The study found greater racial disparities in high-cost loans made to middle- to upper-income minorities than to low- to moderate-income borrowers.

Are the disparities found more at the huge national banks, or the small, private ones? I don’t want to speculate on which ones, but I’d say that the problems are likely the function of systemic breakdowns and the people involved rather than companies directing their lenders to discriminate.

Hopefully this story won’t go away.

If possible, I’d like to see a greater breakdown, by locality, of the numbers. The Charlottesville MSA comprises Charlottesville, Albemarle, Fluvanna, Greene and Nelson (and Louisa, although it’s not included in the numbers).

Update 7/13/07:  The Daily Progress has an article today that shows that raises three interesting points:

1) Out-of-state lenders specifically targeting black borrowers may be the primary culprits.
2) “On average, black households have one-sixth the total assets of comparable white households, he said.”
3) “Income is just one aspect of a borrower’s creditworthiness. There are a number of factors, …”

Again, an apples to apples comparison is needed to make an accurate assessment of the situation. There are too many factors besides income to be considered when applying for a loan. No doubt there is discrimination happening, although I would feel a lot better about our community if it could be determined that a super majority of these loans were coming from out-of-state lenders.

Education is the key – education of the lenders (again, I have yet to meet one in Charlottesville who does this) and education of the consumers. Heck, start at the Mortgage Professor’s site.

The NCRC went after Zillow last year.

Update 7/17/2007: As a black mortgage broker, I am going to go on record and say that this lawsuit is bunk for a number of reasons:

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  1. Waldo Jaquith July 12, 2007 at 13:04

    Pull the files from the top three local banks (or more), and compare apples to apples on applications – credit scores, income, debt ratios, the whole thing, and report those findings.

    That’s a great idea. I can’t imagine that many (any) banks would be game for opening up files like that, even with all personally-identifying information redacted, but it’d be great if they were.

  2. Jim Duncan July 12, 2007 at 22:38

    I agree, but it would be a heck of a demonstration for a company to take in light of what may very well be a deserved firestorm.

  3. Jalane Schmidt July 13, 2007 at 05:29

    Not enough folks in the financial and real estate industries involved are willing to look at issues of racism. Thanks for running this story, Jim.

  4. Jim Duncan July 13, 2007 at 12:10

    Two questions –

    1) Did they just get aggregated, non-lender-specific data, or do they know which lenders are the violators?
    2) Will they disclose the violators?

  5. Joel July 13, 2007 at 14:19

    I’m questioning your statement that “no doubt there is discrimination happening.” The only thing there’s “no doubt” about is that we have pretty useless data. Without knowing the detailed credit characteristics of the borrowers in question, we can’t come close to drawing a conclusion about discrimination.

    Let’s assume that, after controlling for income levels, the minority borrowers have on average lower-quality credit metrics. Then it’s totally reasonable to expect that out-of-state lenders specializing in high-risk lending would target those borrowers. Minority status may be correlated to these disparate outcomes, but not necessarily the cause of outcomes.

  6. Jim Duncan July 13, 2007 at 14:25

    Joel –

    Thank you for stopping by.

    I agree with you and probably should not have written that. The data is incomplete and should be released for public scrutiny.

    I should have left my comments at “we need to compare apples to apples.”

    Thank you for pointing out my poor logic.

    Incidentally, I just donated to a presidential campaign for the first time yesterday, for Dr. Ron Paul.

  7. Joel July 13, 2007 at 15:52

    Jim you’re not alone, my first presidential campaign contribution ever was also to Ron Paul, last month!

    By the way, love the blog. It’s good to see honest realtors like yourself succeed in the business.

  8. UVA08 July 13, 2007 at 16:18

    Some lenders are pointing out the fact that minorities may have less assets and wealth which may also contribute to the correlation we see. This only brings us to the question of why there is still this disparity between blacks and whites in terms of wealth and assets. Are we to believe it is solely due to personal characteristics like being willing to work hard, morals, and upbringing or are there deeper historical roots for this problem? This, of course, takes us out of a discussion on real estate and into one that deals with a very sensitive subject for most Americans. I believe there is some writing on this subject by authors by the name of Oliver and Shapiro.

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