HSBC, Wells Fargo Accused Of Racism In Mortgage Issuing

The NAACP this week filed a class action suit accusing Wells Fargo and HSBC of charging unfairly high interest rates to African American homeowners with high incomes and high credit scores. The banks were quick to slap down the charges as “totally unfounded and reckless,” even in the face of convincing evidence from the NAACP.

The lawsuit cites several studies that document discrimination, including a 2006 report by the Center for Responsible Lending that found black people were 31 percent to 34 percent more likely to receive higher-rate subprime loans. The suit claims the banks violated the Fair Housing Act, the Equal Credit Opportunity Act and the Civil Rights Act.

“Generations of African Americans have been deprived of the opportunity to participate in the American dream by banks that refused to give them mortgage loans simply because of the color of their skin or placed them in unfavorable loans that decimate them financially,” the suit states. “It is beyond dispute that the African American community has long been the victim of discriminatory banking practices.”

Jealous said subprime mortgages, intended for people with poor credit, were given to African-Americans who qualified for better loans 54 percent of the time compared with 23 percent for white people.

The class includes any African American who received a subprime loan even though they qualified for a standard loan. The NAACP was set to name a third bank in the suit but the still-unnamed bank escaped the outing by settling before the suit was filed.

Banks accused of racism in home loans [The San Francisco Chronicle]
(Photo: digicla)

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  1. nospacesinmyname says:

    yodas light saber is green

  2. taney71 says:

    Oh, boy. I think at one point in everyone’s life someone calls them racists. Maybe not to their face but it happens. Its a sure fire easy way to end a conversation or debate you aren’t winning.

    • Eyebrows McGee (now with double the baby!) says:

      @taney71: Yes, but most people probably aren’t facing damning statistics showing their level of consistent institutional racism.

      • taney71 says:

        @Eyebrows McGee (on Twitter: LPetelle): I wonder if the statistics are there. If you just look at minority loans it might look like they were given loans they couldn’t afford. But if you look at the entire population everyone was given these type of loans.

        We have to remember the federal government was encouraging these loans either through laws like the Community Reinvestment Act or by direct threat. Politicans like Barney Frank who pushed these loans said as recently as 2005 when the Bush administration was trying to regulate the area that the system was fine. Frank basically called the Bush people racists for even thinking that minorities might not be able to pay these loans.

        • dragonpup says:

          @taney71: I highly suggest you actually read the article and not repeat talking points from some political hack.

          “The class actions against Wells Fargo, based in San Francisco, and Illinois-based HSBC claim that black homeowners were far more likely to be issued a higher interest rate than white borrowers with the [b]same qualifications. “

          “Jealous said subprime mortgages, intended for people with poor credit, were given to African-Americans who qualified for better loans 54 percent of the time compared with 23 percent for white people.”

          This isn’t a margin or error deviation, blacks were apparently getting taken advantage of with loans at a signifigantly higher rate than whites.

        • Papa Midnight says:

          @taney71: It’s not a question of whether or not everyone got it, but a question of whether or not one specific group was substantially targeted to receive the loans more than another group. The statistical data does indeed show that more African Americans receive Sub-prime loans than any other ethnic group.

          Now the other fact of the matter is that these guys, unlike what most people seem to think, did not get loans they knew they could not pay. When they got the loans at the absolute behest of their lenders, they were assured their rates would likely never change or if they did change, they would remain low. On that notion, groups of people, primarily first time home buyers – not just African Americans – got loans, which for a period of time, they believed they could pay off. Additionally, lets be real with ourselves: Till those rates started jumping through the roof, persons with these adjustable rates COULD pay off their mortgages. It was only AFTER their rates went to ridiculous highs by comparison to their original rates that they became unable to pay their mortgages.

          Therefore, the statement that they jumped into mortgages irresponsibly knowing they couldn’t pay it off is a misconception and possibly a complete fallacy.

          I believe the show, Boston Legal did an episode on this…

          Not to mention banks had a history over decades of not lending to African Americans. In the cases in which they would, they ended up charging higher rates than other ethnic groups. Now the latter has become more prevalent. It’s just become more difficult to prove.

          While we’re on the subject, how about taking a ride through a predominantly minority area and seeing how many banks there are? If you find something other than a Bank of America branch, let me know and I’ll eat my words.

          • floraposte says:

            @Papa Midnight: ShoreBank. Now in Detroit and Cleveland as well as Chicago. However, that kind of community service is key to its history and mission, so I’d be willing to exempt it as a special case. Wish it weren’t. See [en.wikipedia.org]

          • Patrick Henry says:

            @Papa Midnight:

            I agree with this. This is a generalization, but blacks tend to be poorer than whites in general. Whether this is due to crime, racism against blacks, white man keeping black people down, whatever…Blacks are statistically poorer than whites.

            So the fact that “more loans were given to black people” than white people should be thrown out.

            However, the part where it says they were given higher interest rates than similarly qualified white people is definitely something to look into.

            We need more information on this story, the statistics of the areas, for example. Until then, I would only cry foul on the interest rates.

          • Drew5764 says:

            @Papa Midnight: So you’re saying that banks are racist for not opening up in minority areas?

            Then check cashing places are racist for not opening up in affluent areas. (Despite that they’re usually owned by banks).

        • MentallyRetired says:

          @taney71: The CRA did not target high-income groups and CRA did not encourage irresponsible loans. And in 2005 Barney Frank had absolutely no real power as he was a member of the minority party. Heck, in March 2005 Congress passed the Act for the relief of the parents of Theresa Marie Schiavo with only 3 Senators present. That was more important to the majority party than financial reform.

    • christoj879 says:

      @taney71: “A quick way to start a conversation is to say something like, ‘What’s your favorite color?’ A quick way to end a conversation is to say something like, ‘What’s your favorite color person?’”

  3. AfraidOfVelcro_GitEmSteveDave says:

    the still-unnamed bank escaped the outing by settling before the suit was filed.

    I think I know where some of that bailout money went.

  4. TEW says:

    This story smells funny to me. Why were they signing a subprime loan if they qualified for a prime loan? The NAACP was only now trying to protect their constituents? The housing boom lasted for about 5 or 6 years so they had plenty of time to file a lawsuit. My feeling is that the NAACP was fine with everything until the hatred towards the banking industry is at an all time high and then gets paid.

    • B says:

      @TEW: Because the lenders didn’t dell the mortgagees they qualified for the prime loan.

      • Papa Midnight says:

        @B: Not to mention that they pushed the sub prime loans with vigor. I believe they refer to that as “predatory lending”.

    • Charles Duffy says:

      @TEW: This isn’t a completely new story — the NAACP has been working on this lawsuit for a while.

  5. chuckv says:

    Correlation does not imply causation

    • floraposte says:

      @chuckv: It doesn’t have to have been deliberate to be a discriminatory lending practice. Unless the banks can offer something else that the divergent rates correlate to, the correlation is sufficient to demonstrate a pattern.

      • Drew5764 says:

        @floraposte: And a pattern is exactly that. The problem is, that the NAACP (founded by someone Jewish) is trying to make correlation something it’s not. If the bankers in question “said” because you’re black you get an inferior quality loan, that’s causation. I wonder if the information that we’re not hearing about (gee, I wonder why…) makes the banks seem significantly less culpable.

        • Eyebrows McGee (now with double the baby!) says:

          @Drew5764: I think you need to read up on the FHA and so forth, and if you didn’t read the article, you need to. If they are similarly-qualified and receiving different rates, it doesn’t matter if the bank is “racist” — it matters that there’s a different effect occurring that correlates to race. That’s it.

        • floraposte says:

          @Drew5764: Actually, it was founded by a group of people, one of whom was Jewish. I’m not sure what that has to do with the issue at hand, though.

          And as for the rest of your comment, what Eyebrows said. A pattern is all it has to be to be discriminatory.

  6. ztoop says:

    There is a reason it is illegal to discriminate services (such as real estate and loans) based on race. It has happened before, and it has negative impact on everyone.

    When it comes to things like systematic bias (that can’t be easily seen on a case by case basis) it can take years to build up a case. And although a computer can describe the risk of someone regardless of race, the loan officer is going to make the final call. This needs to be fixed, and given how much money these banks likely made of these types of loans, they need to pay to fix it.

    @James Babiak.. Get real.

  7. Ninja007 says:

    the whole reason we got into this mess was because the banks were making risky loans. Now those people are defaulting. If anything the naacp should be apologizing to the banks

    • Charles Duffy says:

      @Ninja007: Huh? The people we’re talking about here qualified for prime loans — by definition, they aren’t risky borrowers.

      • Drew5764 says:

        @Charles Duffy: Come take a look around any neighborhood where the homes USED to sell for around 600K-1mil and you’ll find a whole lot of people who thought they weren’t risky, but now can’t make their payments. In the outer boroughs of NYC, a 600k home isn’t a mansion either.

    • MentallyRetired says:

      @Ninja007: “the whole reason we got into this mess was because the banks were making risky loans. “

      Of course banks make risky loans! The risk is how they make money! The reason we got into this mess is that banks didn’t know how big the risk was and how to price it accordingly. And due to the skyrocketing costs of real estate during the boom, they figured that even if a $200,000 mortgage defaulted in a year, the house could then be sold for (for example) $250,000 and the interest paid over the year, and that extra $50,000 would be profit.

  8. ionerox says:

    This isn’t a new accusation against either of these banks. It seems like something that is difficult to figure out, with so many factors going into a decision on a mortgage loan. Of course, if either company was actually using race as a statistic to give a loan- that’s just BS. Skin color isn’t a valid predictor of risk on a loan.

    Of note, not that many years ago- both companies were accused of not giving enough loans to African Americans.

    And, the study that the lawsuit is based upon also states that whites were disadvantages compared to Hispanics on receiving many different types of loans… [www.chicagofed.org]

  9. madanthony says:

    Jealous said subprime mortgages, intended for people with poor credit, were given to African-Americans who qualified for better loans 54 percent of the time compared with 23 percent for white people.

    I wonder how they define “better loans” – my understanding is that lots of people got subprime loans because they could qualify for a better loan, but not with terms they wanted – length, down payment, ect – or they wanted to borrow more than they could with a regular loan.

    The lesson in this is to shop around for a mortgage.

  10. TEW says:

    @B
    That is if you only use one mortgage lender. Where I live you could walk to 5 different banks and apply for a loan. If you do it within 30 days the applications don’t hurt your credit score. The all mighty dollar usually trumps any racism.

    • floraposte says:

      @TEW: Unfortunately, that’s not necessarily true. Competitive opportunities don’t always eradicate the difference between deals offered to different races or genders.

  11. chuckv says:

    Let’s make an assumption for a moment: that, adjusted for all other measurable factors, race and race alone impacts the default rate of a loan. Would it not then make sense for race to be a factor in whether or not one gets a loan? The social utility of financial institutions is that they allocate capital (which there is a limited amount of,) and if they are able to better predict who will best use said capital, society as a whole is better off.

    • PunditGuy says:

      @chuckv: I’d love to see the banks use that argument. “Them pesky black folk — they just don’t pay us back as often as white people. That’s why we steer them toward subprime loans.” I’m sure the DOJ would have a field day with that.

    • Eyebrows McGee (now with double the baby!) says:

      @chuckv: Even if it “made sense,” it would be illegal under federal law.

      Sometimes these threads make me fear for American history classes — seriously, do half the high schools in the nation give a total miss to the Civil Rights era?

  12. Brontide says:

    I find this incredibly hard to believe. In the past decade there was so little human intervention in lending and I can assure you that race was not one of the factors used by the computers.

    This sounds like a shakedown to me.

  13. Trai_Dep says:

    @taney, @ eyebrows:
    I’ve just noticed that people here that use the words “Barney Frank”, “CRA” and “statistics” in the same sentence always throw out the word “statistics” without even the merest wisp of familiarity of the term.

    I could pile on further, but it’d be like describing the flocking patterns of veldt antelopes to a fish.

  14. James Babiak says:

    And why shouldn’t race be a factor, any more then gender or age? When I got car insurance as a kid, I had to pay a very high premium. I was 25 or a female at the same age, I would pay less. Why is that legal and accepted? The insurance companies can take into account those factors when looking at statistics on accidents and claims, and adjust their rates accordingly. If a young male has a higher risk, they pay a higher premium. If the default rate for blacks on mortgages are higher then average, why shouldn’t they pay a higher premium? Because if they don’t for political correctness, guess who is paying for it? You and me.

    • TerribleDecade says:

      @James Babiak: That’s right, insurance is very discriminatory, why shouldn’t mortgages be as well?

    • Papa Midnight says:

      @James Babiak: Or we could be thinking about how to end discriminatory practices instead of justifying them. And that’s not political correctness, that’s just plain old fairness and honor.

    • spanky says:

      @James Babiak: You know why they can’t discriminate based on race? Because it’s illegal.

      They can and will discriminate based on anything and everything they are legally allowed to, and race is one of the few things they’re not allowed to consider. If you want to argue that, build a time machine.

      And stop assuming everyone you’re addressing is white.

    • Paladin_11 says:

      @James Babiak: Because race is irrelevant in the examples you cite?

      Young people pay higher insurance rates whether they’re white, black or Asian. The correlation is with age, not ethnicity.

      Here’s a stereotype for you. Asians drive slower than all other races. Because of this they should receive a significant discount on their auto insurance. Sounds stupid, doesn’t it? Because it is–and it isn’t true.

      The default rate for loans more closely correlates with poverty than race. I assure you poor whites default on their loans just as much as poor blacks do. The issue here is– when pricing in risk of default–should blacks pay more? The law says no, and statistics should bear this out. Otherwise banks would have found a legal way to price this, just as insurance companies have done.

      This is why stereotypes are dangerous. The weak minded focus on the things they don’t like and generalize that to encompass an entire class of people. It’s in no way fair to those people as a whole when you use a few examples to denigrate the entire class.

      The “R” word should be used sparingly but when evidence presents itself it must be used to make an example of the offender. You, James Babiak, are a racist. I’m sure you don’t like to think of yourself that way but your postings here indicate otherwise. Perhaps you should ask yourself why you feel so strongly that race should be a factor when making loan decisions.

      Oh, and since I refuse to stereotype I’ll note that I don’t think all white people are racists just because you are.

    • Eyebrows McGee (now with double the baby!) says:

      @James Babiak: Two words, repeat them carefully after me: FEDERALLY ILLEGAL. You MAY NOT discriminate in banking based on race.

      It’d be nice if we could discriminate on Consumerist commenting privileged based on “basic education in the recent history and legal system of the United States for those claiming citizenship in such nation,” though.

      You really enjoy showing off your ignorance, don’t you? And it’s clear you take pride in your backwards racist ideas and assumptions. Disgusting.

    • worrytron says:

      @James Babiak: go back to europe.

  15. LJKelley says:

    BBC News actually had a shaded map of percent of defaults Deutshe Bank had in Cleveland and then compared a map of where Blacks lived in the city. I guess some who are way to PC would see that as racist, but its not racist to show facts.

    • James Babiak says:

      @LJKelley:

      In a perfect world, that would be the case. In reality though, anything that is said, regardless of how true it is, that casts a bad light on any race, is considered racist. Take crime and news reports for example. A lot news stations will no longer say the race of the suspect. They will give every other physical description, but not race. Why is that do you think? It should be the first thing said, as it is the most discerning physical feature. And look at crime reports. Recently many have stopped showing racial statistics. Why? Because they know if they print that the majority of crimes are committed by minorities, they will get sued by one of these NAACP groups. Liberal idiots want to ignore statistics. They want to pretend that they mean nothing, and everyone is a wonderful unique person who is independent in thought and belief. This is BS. Fact is, if 85% of crimes are committed by a certain group of people, then when a new crime of that type occurs, there’s an 85% chance that it was done by a member of that group. Let’s grow as a society and stop this political correctness crap.

      • PunditGuy says:

        @James Babiak: The majority of crimes are not committed by minorities. The majority of crimes are committed by white people. A disproportionate number of minorities are charged and convicted of crimes — but even then, they’re not the majority. Where do you get this crap?

      • ZManGT says:

        @James Babiak: No one else is backing you up, but I will. I agree with everything you are saying. Facts are facts, you can’t hide from them no matter how hard we try.

        • PunditGuy says:

          @ZManGT: Facts are, indeed, facts. These are from 2007, the most recent year with complete arrest data encompassing 11,929 agencies.

          [www.fbi.gov]

          Stats for Total Arrests

          Total arrests: 10,656,710
          White: 7,426,278
          Black: 3,003,060
          American Indian or Alaskan Native: 142,969
          Asian or Pacific Islander: 84.403

          Stats for Percent Distribution

          White: 69.7
          Black: 28.2
          American Indian or Alaskan Native: 1.3
          Asian or Pacific Islander: 0.8

    • Paladin_11 says:

      @LJKelley: It isn’t racist to show the map. It’s racist to only allow blacks to live in certain parts of the city, and to use loans to force them into those areas. Which used to happen.

      Take a look at the history of housing in the US. Not all of the homes in these so-called black areas were purchased during the recent crisis. They were bought in the past 30 years by people who had jobs and could afford their homes. But I’m sure you’re not blind to the economic downturn, right? Downturns disproportionately affect the poor. They have the least savings and when they lose their jobs they go into default more quickly. It’s not a race issue, it’s a poverty issue. What would similar maps show in an area with fewer black people? Say, parts of Nevada or Idaho?

      This is a case of using statistics to lie, or at best support a certain political agenda. Theoretically statistics are neutral but in practice they never are. Consider that before you believe everything you read.

  16. ckaught78 says:

    If you have bad credit and a low credit score you should be offered a higher rate, regardless of skin color. Banks are in business to make money. When making you a lone they will take into account your credit history as well as how much they can make. All things being equal, if you qualify for a 6% loan and I as a bank or broker working with a bank offer you 7% and you accept that offer then I just made more money on that loan. You as the customer have the choice to educate yourself and not accept that loan. Had the customer taken 30 extra minutes and shopped around they probably could have been offered the 6%. I am sick and tired of all the Rev. Sharptons of the world blaming race for there problems. Perhaps I am biased becasue I am white, but it is time to take a little personal responsibility. If white in this situation make the same accusations they would be laughed out of court.

    • oneandone says:

      @ckaught78: they probably could have been offered the 6%.

      Or they probably could have received the exact same discriminatory (and predatory) lending offer. Given that ‘probably’ should reflect what’s likely to happen, I’d go with my scenario. Especially since it’s supported by the article above & a history of disciminatory redlining practices.

      And since when does it make sense for the victim of consumer fraud to “take responsibility” for the fact that someone perpetuated a fraud on them?

  17. Venarain says:

    I am pretty shocked by how quickly “consumerist” are to believe that these immense and, as recent history shows, basically evil companies are being taken for a ride by african americans. that there is some big black conspiracy to steal our bail out money. cause we all know that racism doesn’t exist any more, and certainly hasn’t played into mortgages and home ownership in the past…

    • nebcorp says:

      @Venarain: Thank you for seeing that as well. I thought the same thing, but fortunately for me, you mentioned it much politer than I could be.

  18. Rohini Jasavala says:

    Not sure about all the details of this, but they don’t even allow photos of any people in loan files, so how could anybody determine race?

  19. dragonpup says:

    @Rohini: Names, accents, location. Plus a lot of people still walk into loan offices to apply.

  20. ceejeemcbeegee is not here says:

    @ James Babiak: If you don’t believe me, go into a black community and look around.

    You mean, like Ladera Heights in Cali or PG county in Maryland, with their million $$ homes? Or the predominately-Black enclave of grandfathered homes in the Hamptons?

    • Papa Midnight says:

      @ceejeemcbeegee: Bachelor at Large: Didn’t even think about that one… Ladera Heights is one of the most prominent communities in Los Angeles and Prince George’s County is one of the richest counties in the state of Maryland. Coincidentally, both are predominantly African American.

    • James Babiak says:

      @ceejeemcbeegee: Bachelor at Large: @Papa Midnight:

      Give me a break. Ok, I’ll play your game. You successfully named THREE predominantly black neighborhoods that are not ghettos. But you stopped after that. Why? Oh, because you ran out of names. Don’t be idiots. You know exactly what I said and meant. Most blacks live in the ghettos of towns and cities. Many nice areas of cities turned into the ghetto when blacks moved in and the crime levels jumped exponentially, and all the people with money moved out quick. Property values plummet. It’s a cycle. And guess what? It has nothing to do with the color of a persons skin. Maybe that was the only issue 60 years ago, but not anymore. It’s the way they act and behave that’s the issue. It’s not my fault that most blacks don’t act and behave appropriately. Maybe the NAACP needs to focus it’s efforts away from suing everyone who doesn’t give them a handout, and instead focus on teaching black kids to take responsibility for their lives, and to educate them with something other then the crap they watch on TV all day. I don’t want to live in the same community as a bunch of drug dealers and gang bangers, coming and going all hours of the night, blasting rap music outside, and doing drugs. Do you? But that’s the type of neighborhood that most blacks live in, and enjoy. Do you honestly think the black family you cited, that lives in an upscale community in PG County would want to live in Compton, CA? No. Because it’s a cesspool for violence, drugs, etc. You need to get off the liberal podium and wake up to reality.

      • Papa Midnight says:

        @James Babiak: I think you missed the boat entirely…

      • samyoed says:

        @James Babiak:

        The sad fact is, if you saw me on the street you’d likely assume that I’m from the ghetto and a baby mama, instead of a graduate student in math at a top 10 university. You’d back up your reasoning with the argument that you’ve got numbers on your side. And when I apply for a job or professorship, some person on the committee, while ignoring my grades and test scores, will assume I’m only there because of affirmative action, because they’ve got numbers on their side.

        Taking racism and couching it in statistics is no better than any other form of racism. At the end of the day, you’re still judging people based on your own preconceived notions.

        The blacks who qualify for non-subprime loans probably look a lot like me, and the black people I know- not millionaires, but not dirt poor. Some may live in black enclaves, but most live in middle-class suburbia or cities. We find the BET, gold tooth culture as degrading as you do. But I wouldn’t assume that you’re in love with monster trucks, guns, and the Confederate flag, and that your girlfriend only watches Rock of Love and other trashy VH1 shows, based on the color of your skin. Why should you do the same for me?

        • Eyebrows McGee (now with double the baby!) says:

          @samyoed: Beautifully said, but the dittoheads won’t care. Their brains turned off years ago and have atrophied from lack of use. :P

      • MisterE says:

        @James Babiak:

        I thought Obama was going to fix all of this. Besides, being accountable and responsible isn’t the American way. Blaming others for your failures is. Also, since you spoke your mind about blacks and the ghetto, you are now considered a racist – never mind the fact what you said is true.

      • christoj879 says:

        @James Babiak: A lot of this was tl;dr, but I tried to interpret your first disemvowelled post and your second.

        At the risk of coming out and sounding like a hood-wearing Klansman, I agree with what you say.

        HOWEVER, if you look at it from both sides of the spectrum, whites do the EXACT same types of things but in their own way. I’m serious, why hate one side when you can hate both? Whites and blacks (and EVERY other color) do stupid things that make others not like them, and then the others incorrectly think they’re the source of the problem.

        Crack is replaced with crystal meth.

        Malt liquor is replaced with Old Grandad.

        Your baby’s daddy is also your stepfather.

        A black’s inner-city neighborhood is a white’s one-horse mountain town.

        Instead of sitting on a porch on a hot urban afternoon, you (whites I mean) sit inside watching Jerry Springer wondering why life sucks so much not realizing how bad the house smells because the cats crap all over it.

        “I don’t want to live in the same community as a bunch of drug dealers and gang bangers, coming and going all hours of the night, blasting rap music outside, and doing drugs.”

        OK, let’s try this from a white-disliking perspective:

        “I don’t want to live in the same community as a bunch of meth-heads and child-beaters, 4-wheeling and partying at all hours of the night, blasting fireworks outside, and drinking scotch.”

        Close?

        [consumerist.com]

        I’m as misanthropic as they come – if you’re going to hate people, please be kind and be an equal-opportunity hater :-)

      • Tsubasa says:

        @James Babiak: If it’s not about the color of their skin, how are you figuring out who to discriminate against? Lucky for you all the bad people of the world happen to be color-coded. Makes it easy to say “that person over there, whom I’ve never met, likes BET, is in a gang, and has 5 baby mommas.”

        Keep telling yourself you’re not being racist and that stereotypes are A-OK. God knows there are no stereotypes about Polish people (Babiak, is it?) that you might not appreciate.

  21. ceejeemcbeegee is not here says:

    @ ckaught78 : Did you even read the article? These were people with the exact same income, credit score, and qualifications as Whites, but they were offered higher rates and subprime loans.

  22. Snarkysnake says:

    Now just a minute here… If these people have high credit scores already,it stands to reason that they manage their money pretty responsibly. They pay their bills on time and avoid trap fees and shoddy loan products . In other words,they are not innocent lambs to be plucked by the sharpies in the typical mortgage deal.It’s hard for me to believe that these folks would not have done their homework and walked away from a sub prime loan if they qualified for a good loan. Thats why I am calling bullshit on the NAACP for this.

    This sounds like more victim creation (“these dolts need us to look out for them”).

    Sorry,guys, but no matter your color or creed,get competent advice before signing on the bottom line.A shitty loan knows no color…

    • floraposte says:

      @Snarkysnake: Even if they had walked away from the loans, the banks would still have been engaging in discriminatory practices by refusing to offer them products of equal value.

  23. acklenheights says:

    A lot of you aren’t thinking beyond race and income. There are many banks competing to give home loans. What these stories don’t mention is that banks have no financial interest in discriminating against minorities. Banks don’t just make lending decisions based on income. Ostensibly the bank will own the property for the entire term of the mortgage, so the lending bank has to consider the property itself–its potential to lose value or be ruined by vandalism, arson, or other crimes. If the property is close to a high-crime area, the bank must factor that risk into their loan.

    The banks have no financial interest in being discriminatory. if one bank passes up a great loan opportunity just because of someone’s race, then another bank can come in and seize the chance to make a good return on a successful loan.

    Keep in mind that the NAACP stages protests around inner-city grocery stores that “overcharge” their clientele without mentioning that the stores have to provide extra security against vandals, thieves, and armed robbers.

    • floraposte says:

      @acklenheights: It’s not looking like it was in banks’ financial interest to make all these subprime loans either, but that didn’t stop them.

      Besides, you’re arguing as if discrimination had to be an intentional policy. It still counts as discrimination if people don’t realize they’re doing it.

      • Shivved says:

        @floraposte: I don’t think you’re completely right on that. If a bank is using other legitimate criteria to determine loan rates (defaults in a given area, property values in a given area, etc.) then it doesn’t matter if it disproportionately hinders minority candidates for loans.

        The problem, however, that you would almost have to argue such criteria on a mortgage by mortgage basis, which will become very expensive for already hurting banks. I have no doubt that these banks will settle with the NAACP like the third bank did. I also have no doubt that the settlements will include a generous donation to the NAACP. This of it like paying protection money to the Mafia.

        • Eyebrows McGee (now with double the baby!) says:

          @Shivved: “it doesn’t matter if it disproportionately hinders minority candidates for loans.”

          Under various federal laws, sometimes all that matters is discriminatory OUTCOME, not discriminatory INTENT.

          Also, I think the comments on this story have made it abundantly clear that there are plenty of people who still by stereotypical racist bullshit that kept redlining minorities out of “nice” neighborhoods such a strong practice for so long. I’m sure some of these bankers thought they were “protecting” nice neighborhoods or using a “legitimate criteria” when they gave worse loan rates. Certainly many posters on this story have given ample evidence that they consider blacks poor loan risks SIMPLY BECAUSE THEY ARE BLACK.

          It’s like 1952 in here, and it’s disgusting.

  24. ceejeemcbeegee is not here says:

    @ sn1per420 : I’m speaking more to his racist stereotyping, not the mortgage loan process. There are all different kinds of Blacks people, from the ghetto to the White House, just as there are all different kinds of White people from the trailer park to Wall Street. To generalize an entire people by watching too much TV (and no one is arguing that BET isn’t horrible) is simply myopic.

    And I would also argue that while you are right –that more AAs live in poorer neighborhoods– the fact remains that these AA in this study had the same credit scores and qualifications as their White counterparts, but they were offered higher rates and less desirable loans. Someone said these people should have just shopped around for a better deal. Perhaps. But the fact that the banks offered these worse deals in the first place based solely on their race is illegal.

  25. ceejeemcbeegee is not here says:

    @ sn1per420 : Well, these were studies done by 2 different entities, right?

  26. Anonymous says:

    So we are saying that whites are better shoppers and consumers than blacks . .. I resent that assumption. Anyone who take out a mortgage without shopping around to several banks deserves what they get. Are we saying that all of the banks colluded to charge blacks higher interest? Somewhere there must have a a lender who wanted to price loans to minorities to get more business. This just doesn’t make sense to me.

  27. N.RobertMoses says:

    I call shenanigans.

  28. ceejeemcbeegee is not here says:

    @ Snarkysnake : You’re missing the point: it’s not that they took the loans, it that they were offered them in the first place. THAT’s what’s illegal… offering them lesser loans simply based on race. Whether or not they signed on the dotted line is irrelevant.

  29. ceejeemcbeegee is not here says:

    @ acklenheights : Who said racism made sense?

  30. ceejeemcbeegee is not here says:

    @ James Babiak : I’ll get off my liberal podium when you get off your conservative one. ;-)

  31. Jetgirly says:

    I am not a homeowner, so maybe someone can tell me- is a mortgage something you’re “supposed” to negotiate for (like a car)? If you’re offered 8% are you supposed to ask for 5% and eventually meet in the middle at 6.5%? I just invested some money in term deposits here in Canada and I negotiated a 50% higher rate than was initially offered to me. Obviously this is leading to me wondering whether white home buyers might be more comfortable or used to negotiating a lower rate (however it may be a non-issue).

    • floraposte says:

      @Jetgirly: I’m USAn, and I’ve never heard of anybody negotiating a loan down. Doesn’t mean it doesn’t happen (hell, I’m thinking maybe it’s worth a try), but nobody I know has done it. So I don’t think that’s a factor.

    • MentallyRetired says:

      @Jetgirly: Yes you can and should negotiate mortgage terms. Banks use computers to come up with a base rate which is the lowest amount their systems believe they should charge you based on your risk, but bank employees have incentives to maximize the bank’s profit (the difference between the rate the bank borrows at and what they lend at). The rate is negotiable until you reach the rate determined by their computer systems, and of course they won’t tell you what that number is.

  32. aguacarbonica says:

    Mods, come on. I don’t want to read crap like the racist shit-show above on the Consumerist. I get enough of such nonsense on Something Awful. Please don’t make me leave one of my favorite websites.

  33. SteelersAreGo says:

    @Babiak: You’re wrong. And did you stop to consider that institutionalized predatory lending keeps a ghetto a ghetto instead of creating opportunities to move up?

  34. Anonymous says:

    The statistical analysis showing well-qualified blacks being offered subprime loans more often than well-qualified whites has been out there for a few years. (The study in question was published in 2006; If it were flawed, it should be possible to critique the details of the analysis and/or show a more careful analysis that doesn’t show the phenomenon described.)

    But that’s not what we’re seeing in this thread. Instead, we’re seeing the usual stereotypes about blacks in general simply assumed to be the cause of the problem. Which, if anything, tend to be their own arguments *against* the claim that racism no longer plays a role in lending or housing.

    Some commentators have assumed that the profit motive would prevent discrimination. This seems to be an argument from incredulity, and one that ignores the history of the profit motive and discrimination coexisting quite obviously in the past.

    Some have argued that loan decisions are made by computers, which don’t discriminate. Loans are evaluated in part by computers, yes, but loans are *offered* by humans, humans who usually have a good idea of the race of their customers (either by seeing them in person or by hearing their voice on the phone). Given that subprime loans have often offered higher commissions to brokers, it makes sense from a purely profit-seeking standpoint to offer them to anyone a broker thinks will be inclined to accept them and not hold out for a better bargain. And if the broker has reason to expect that blacks will be more likely than whites to think that’s the best deal they’ll manage (perhaps in part due to long-term subjection to attitudes like some seen upthread), then racial discrimination and profit maximizing go hand in hand in the broker’s actions.

    Is that actually what happened? Well, I don’t have enough information myself to say for sure. But it’s consistent with the study’s reported results. There are other possibilities as well (including scenarios where few individual brokers discriminate in offerings, but where blacks are more likely to consult brokers that push subprime loans more aggressively than the brokers primarily consulted by whites).

    I imagine that if the case goes to trial, we’ll see more evidence that may help clarify which scenarios actually applied here. But given recent American history, not to mention some of the content of this thread, I wouldn’t blithely assume that racial discrimination is not a factor.

  35. thegirls says:

    @acklenheights: Wow! Really? Actually, high crime is a socioeconomic issue, not a race issue.

  36. thegirls says:

    @acklenheights: You think the banks have no financial interest in charging higher rates wherever they could? Don’t banks make more money from fees and higher interest, sub-prime loans?

    Also, just because somebody pays their bills on time and is a smart person doesn’t mean they all should understand the complex mortgage games that were played out these past few years.

    STOP BLAMING THE CONSUMER FOR EVERYTHING FOLKS!

  37. James Babiak says:

    So I guess you would side with this guy, right?

  38. thegirls says:

    Did the moderators take the day off?

  39. CumaeanSibyl says:

    I don’t know if the NAACP’s allegations are true.

    What confuses me is why so many of you are vehemently against them from the outset, to the point of insisting that no such qualified black borrowers exist, that the statistics were compiled by liars, or even that banks can be relied upon to act in their own interests — a proposition I find somewhat less than compelling.

    Why on earth are you so angry? Think black people have it too good these days, or something?

    • Eyebrows McGee (now with double the baby!) says:

      @CumaeanSibyl: Obviously, corporations only do mean, unethical things to the downtrodden white people. They’re nothing but kindness and generosity to individuals of color! I mean, once Lincoln won the war, THERE WERE NEVER ANY RACIAL PROBLEMS IN AMERICA AGAIN! Duh!

  40. Justin Larson says:

    Pretty much every African American I’ve ever met is an engineer. Therefore, all African Americans are engineers. Engineers are busy people, and don’t always understand financial matters. Its unfair for banks to illegally target these African Americans just because they are busy engineering. [Racism is fun]

  41. valor77 says:

    Correct me if I’m wrong, but isn’t it optional to disclose your ethnicity on an application for financial credit? Is the NAACP actually contending that the machine that analyses credit scores and history reads “black” in the ethnicity category and changes the calculations? Perhaps minority clients have more sub-prime mortgages because minorities (statistically) have worse credit and lower income levels… The NAACP has cried wolf one too man times, and now nobody believes them.

  42. Justin Larson says:

    @valor77: RTFA

    Quoted for the millionth time “Jealous said subprime mortgages, intended for people with poor credit, were given to African-Americans who qualified for better loans 54 percent of the time compared with 23 percent for white people.”

    So this entire thing is about people who qualified for regular mortgages but were given subprime mortgages. African Americans who qualfied for regular mortgages were given subprime mortgages a disproportionately high percentage of the time as compared to all applicants who qualified for regular mortgages.

    (On a side note, reply doesn’t seem to be working for me)

  43. Jeff Newman says:

    I feel I need to chip into this conversation. For one, I worked as a mortgage underwriter with Wells Fargo for seven years. I now work as a Mortgage Loan Fraud Analyst for a different company.

    1. The lender absolutely knows the race of the borrower. Why? Because the government REQUIRES THEM TO. The Home Mortgage Disclosure Act requires lenders to report the gender, race and ethnicity of borrowers, and as such, the loan application has these questions on it. If the borrower refuses the answer these questions, the loan officer must guess the gender, race, and ethnicity.

    2. As I mentioned, I worked at Wells Fargo, and as such made the final decision on whether or not to approve a loan. I can say pretty emphatically that I never, ever, ever saw any evidence of racism in the lending decisions made. Period.

    That said, I don’t think the figures are lying. Rather, I think it is a problem of motivation on part of the loan officer.

    Lets look at the problem. At Wells Fargo, there was Subprime loan officers, and there were prime loan officers. They typically worked out of different offices. The subprime offices would typically be in areas where a subprime market would be expected. Now, we know that by any study you look at, black and hispanics on the whole tend to have a lower average income level than caucasians, and ditto for credit scoring and several other factors that come into play in a credit decision. I’m certainly not saying this is right or fair, I’m simply stating that the statistics bear this out.

    As a result, subprime branches would tend to be located in areas with a higher percentage of minority groups. So, there is a higher chance that the first Wells Fargo loan officer an African American would see is a subprime loan officer.

    Here is the dilemma. The loan officer is paid on commission. Subprime loan officers could not sell prime loans. So, they have the option of referring loans to prime loan officer, or keeping the borrower by talking them into the subprime loan. Further, as the entities are separate, who is to say that the subprime loan officer even realizes that the borrower qualifies for a prime loan?

    I think this effect is enough to skew the figures. I will say that Wells Fargo did have a pretty robust referral program to encourage referrals, but in general, a loan officer would make more money closing a loan themselves instead of referring it. Thus, I believe the figures are what they are because there is a greater tendency for a minority borrower to start their process of obtaining a loan in front of a subprime loan officer (because that office would tend to be closer), and the loan officer’s incentives were to make the loan themselves rather than refer.

    I think the data needs to be analyzed to see whether their is a discrepancy in race with regards to referrals to a prime loan officer. I would be very interested to see if more whites were referred to prime loans that started in subprime than blacks. If so, you can toss everything I said out the window. However, I suspect that the referral numbers would be pretty similar.

    • TEW says:

      @Jeff Newman:
      Thank you for adding to this conversation. What you said makes a lot of sense. Aslo from what you said I am guessing that it was not racism but a bad company policy that led African Americans into a subprime loan. I agree it would be interesting to see the referral study for whites. I am wondering why can’t a subprime lender give prime loans?

  44. Trai_Dep says:

    @Jeff:
    Thanks for adding to the conversation. I can see what you’re saying about the loan process being structured in a way that, once an applicant – who’s more likely to draw from a minority neighborhood – signs up with a sub-prime loan officer, they’re unlikely to be able to escape them. So that even if the officers aren’t racist, minority applicants find themselves accepting sub-prime rates even if it’s not because of overt discrimination.

    But if Wells Fargo structures their system in a way that results in racist results, aren’t they still culpable?

    I know that if I were in that position, I’d run a quick back-of-envelope regression to check the racial makeup, just to check. And I’m not a highly-paid banking professional working in an industry that, with the insurance one, birthed the term “redlining”. If I were that person, I’d be wary of – purposefully or not – going down that ugly path once more. Why shouldn’t Wells Fargo be judged harshly for not doing the same?

  45. nebcorp says:

    [www.efanniemae.com]

    This is link to the Uniform Residential Mortgage Application, and at the end, it does ask for demographic information.

  46. valor77 says:

    @Justin Larson: RMFP (Read my f-ing post)

    I opened up with “correct me if I’m wrong.” So if I actually am wrong about being able to leave your race off an application, that’s OK, it doesn’t invalidate my other points. My point about people with worse credit scores and lower income getting less favorable mortgages stands.

    • floraposte says:

      @valor77: The point is that people with the same credit histories were getting different results depending on their race, though.

  47. ninjatoddler says:

    To the dude who’s using (racial/gender) stereotypes to justify racism:

    If black people like to wear 24k gold braces and drive with 32″ wheels, white people like to sleep with their siblings, hispanics are illegal immigrants, and asians drive like grandmas.

    As for the gender issue, what’s the big fuss about paying more for being a dude. All through our lives, we’re essentially getting preferential treatment for our gender so quit complaining about a minor insurance quote you got which is probably your own fault to begin with. If you drive bad and have a record, you’ll pay more regardless of gender.

  48. fatcop says:

    I see like any good shake down artist, they never miss an opportunity.

  49. James Babiak says:

    Crrct m f ‘m wrng, bt dn’t mrtgg lndrs tk thr thngs nt cnsdrtn bsds jst prsn’s crdt nd mnthly ncm? Myb ths thr fctrs ld t th rsns fr th hghr rts. nd myb th rsn why blcks wr mr sttstclly prn t thm wr bcs thy hd lt f ths thr ngtv trts n cmmn…
    mplymnt Hstry: Drg Dlr, Pmp, Plyh, tc. r prbbly nt gng t scr t hgh wth lndr, rgrdlss f hw mch yr ‘clnts’ nd ‘hz’ mk y mnth.
    Fmly: 8 Kds nd 5 Bby’s Mms n 3 dffrnt stts mght mk th bnk hv t tk chld spprt nt cnsdrtn.
    ssts: 24k Gld Tth nd 32″ Rms dn’t hv mch rsl vl.
    Nt t mntn th fct tht mst f ths hss bng mrtggd wr ls prbbly n th ghtt. mgn th vl nd ftr prjctd vl mght ls ply prt.
    nd whl m mxng sm fctl bsd hmr wth my pst, n ll srsnss, rn’t rts clcltd mstly by cmptr tkng nt ccnt hndrds f fctrs? r thy gng t s th cmptr prgrmmrs nxt? Lt thm jst s vryn, bcs gd frbd thy tk rspnsblty fr thmslvs.

    • andrewe says:

      @James Babiak: Correct me if I’m wrong.

      You’re wrong.

    • spanky says:

      @James Babiak: Wow. “Factual based humor,” is it?

      I don’t think you’re qualified to judge whether something is or is not racist.

      • James Babiak says:

        @spanky:
        When I said ‘factual based humor’ I was talking about my examples. Black culture glamorizes everything I cited. If you don’t believe me, go into a black community and look around. Or if you aren’t suicidal, watch a little BET for as long as you can stand it. If you disagree, show me some statistics that prove that I’m wrong. There is a reason why racial stereotypes exist. It’s because people of that race exemplify them. You can disagree with me and call my point of view racist, but I will in turn call your view ignorant.

    • dragonpup says:

      @James Babiak: Way to make racist jokes while not reading the article.

      • James Babiak says:

        @dragonpup:

        On the contrary. I read the article on consumerist as well as the original one on seattlepi.com. Nothing was substantiated. It was all a lot of claims about how whites got better rates on average. Then goes onto a spiel about how hard life is for minorities. And finalized with the report of the successful extortion of one bank, and how they want to stop the other two from this horrid practice….
        Here comes affirmative action in the mortgage market.

    • Papa Midnight says:

      Correct me if I’m wrong…

      @James Babiak:

      You’re wrong. And congratulations, you can make racially motivated jokes.

      @James Babiak: Or maybe you can watch other television networks like CNN. What, are you going to say Michael Steele and Barack Obama are secretly saying “YEAAAAAAHHH BOOOIII” behind closed doors, next?

      You’re obviously a person who follows stereotypes a bit too much.

      • sn1per420 says:

        @Papa Midnight: @ceejeemcbeegee: Bachelor at Large: No one said all black people are from the ghetto, but unfortunately, the fact is that more black people in this country live in the neighborhoods described by James Babiak, than in the well to do neighborhoods described by ceejeemcbeegee. Based on that fact, it would seem logical that on average, black people would get less favorable loans.

        • sn1per420 says:

          @sn1per420: And just to clarify, I’m not saying the claims made by the NAACP are completely baseless, I just have a problem with this particular statistic:

          a 2006 report by the Center for Responsible Lending that found black people were 31 percent to 34 percent more likely to receive higher-rate subprime loans.

          If the other claim made in the article (about African-Americans getting worse loans than they qualified for 54% of the time) is true, the suit definitely has merit. I just don’t like the use of that first average statistic.

        • Papa Midnight says:

          @sn1per420: I wouldn’t argue that point, but his statement was highly stereotypical and quite clearly pointed at a majority of blacks indiscriminate of where or how they live.

        • Eyebrows McGee (now with double the baby!) says:

          @sn1per420: There are more poor white than poor blacks in the US, too. And yet similarly-qualified blacks were given inferior loan terms to whites.

          And GOD there are a lot of uninformed racist assholes on Consumerist for a Sunday.

    • MentallyRetired says:

      @James Babiak: “aren’t rates calculated mostly by computer”

      The base rate is calculated by computer but then employees are incentivized to get as high of an interest rate as they can get the borrower to agree to. Then the difference between the rate which the bank borrows at, and what it lends at is profit, which they like to maximize. And this post is horribly prejudiced and not funny at all.

    • levelone says:

      @James Babiak: The problem with your viewpoint is that you’re starting from faulty assumptions.

      First, we’re 50 years out from the Civil Rights movement and society still has not even begun to fully heal from the divisive schism created by the entrenched racism of the last 200 years. White people in America still hold a priveleged position that African Americans and other minorities are struggling to overcome. Are you black? Then don’t try to “explain” and over-simplify the problems that black Americans face. You don’t speak for any minority, you speak for yourself from your place of white privilege.

      And since you’re such an expert on ghettos, why don’t you check out what Wikipedia has to say about ghettos:

      “Due to segregated conditions and widespread poverty some black neighborhoods in the United States have been called “ghettos”. Most of these neighborhoods are in Northeastern cities where African Americans moved during The Great Migration (1914-1950) a period when over a million African Americans moved out of the rural Southern United States to escape the widespread racism of the South, to seek out employment opportunities in urban environments, and to pursue what was widely perceived to be a better life in the North. African-American neighborhoods started out well, economically. In the Midwest, neighborhoods were built on high wages from manufacturing jobs. However, segregation increased most in those cities with the greatest black in-migration.

      In the years after World War II, many white Americans began to move away from inner cities to newer suburban communities, a process known as white flight. White flight occurred, in part, as a response to black people moving into white urban neighborhoods, and remains a significant cause in the spread of urban decay. Discriminatory practices, especially those intended to “preserve” emerging white suburbs, restricted the ability of blacks to move from inner-cities to suburbs, even when they were economically able to afford it. In contrast to this, the same period in history marked a massive suburban expansion available primarily to whites of both wealthy and working class backgrounds, facilitated through highway construction and the availability of federally subsidized home mortgages (VA, FHA, HOLC). These made it easier for families to buy new homes in the suburbs, but not to rent apartments in cities.

      In response to the influx of black people from the South, banks, insurance companies, and businesses began denying or increasing the cost of services, such as banking, insurance, access to jobs, access to health care or even supermarkets to residents in certain, often racially determined areas. The most devastating form of redlining, and the most common use of the term, refers to mortgage discrimination. Data on house prices and attitudes toward integration suggest that in the mid-twentieth century, segregation was a product of collective actions taken by non-blacks to exclude blacks from outside neighborhoods.”

      Oh, look, MORTGAGE DISCRIMINATION. That was 60 years ago. And it’s still happening to the same group of people, who have done nothing to deserve it. Wake up and drag your head out of the sand.

      Ghettos: created by racism, maintained by racism, used as examples by uninformed buffoons who want perpetrate the myth of “those irresponsible black people!”. Go back to school and learn some history.

      A parting paragraph from Wiki:

      “Despite mainstream America’s use of the term “ghetto” to signify a poor, culturally or racially-homogenous urban area, those living in the area often used it to signify something positive. The black ghettos did not always contain dilapidated houses and deteriorating projects, nor were all of its residents poverty-stricken. For many African Americans, the ghetto was “home” a place representing authentic blackness and a feeling, passion, or emotion derived from the rising above the struggle and suffering of being black in America. Langston Hughes relays in the “Negro Ghetto” (1931) and “The Heart of Harlem” (1945): “The buildings in Harlem are brick and stone/And the streets are long and wide,/But Harlem’s much more than these alone,/Harlem is what’s inside.”

    • Vastarien202 says:

      @James Babiak:
      I think James would like to buy a Vowel…

  50. Justin Larson says:

    @valor77:

    I was commenting on the fact that the article is specifically talking about equally qualified applicants. If two applicants are equal in everything but race, and they get different results, this is called racism.

  51. Brazell says:

    This is ridiculous.

  52. Jeff Newman says:

    “I am wondering why can’t a subprime lender give prime loans?”

    Good question, although a moot one now as subprime, as referred to in this article, essentially doesn’t exist anymore.

    I think right before all of this blew up anyways, there was a push to consolidate. There was also almost constant revisions to the referral policy, undoubtedly to try to prevent conflict of interest issues like the one I described.

  53. Jeff Newman says:

    “But if Wells Fargo structures their system in a way that results in racist results, aren’t they still culpable?

    Why shouldn’t Wells Fargo be judged harshly for not doing the same?”

    A few things.

    1. If my presumption is correct, I don’t think we are looking at “racist” results. If, as I suspect, a similar percentage of blacks were referred to prime loans as whites, then I don’t see it as racist as much as I do people getting screwed by a loan officer no matter what the color of their skin. The sad fact of demographics means greater numbers of African Americans would be applying for sub prime loans to begin with. I don’t see enough here to demonstrate that the numbers don’t reflect “more in, more out.”

    2. I’m near positive Wells Fargo recognized the problem. This lawsuit is NOT the first to bring this up, I heard about this issue at least 5 years ago. The problem is, how do you fix it?

    Let me try an analogy. A person is in the market for an automobile. It just so happens that Chevrolet makes a “perfect” car for them. Problem is, this person is standing in a Pontiac dealership, looking at a car that is more expensive and missing key features.

    The optimal solution for GM is that the Pontiac salesman refer the person over to a Chevy lot. But how do you encourage that behavior? Without a referral plan, the salesman’s best interest is to hard sell the customer into the car that pays them money, even if it is the wrong one. The only readily apparent way to change that incentive is if the salesman got paid EXACTLY THE SAME AMOUNT to refer a borrower as they would make selling them a car themselves.

    However, it is not like the Pontiac salesman is going to work for free either, so you would have to pay him as well. But paying two salespeople full commission on one car destroys profits pretty quickly.

    Another option- consolidate so that Chevy and Pontiac are sold at the same dealership, and thus the salesman can steer the borrower into the best vehicle without a conflict of interest. Sounds good, but on a real level it would be an enormous undertaking. Which lots do you close? Who manages the new lots? etc etc.

    Of course I am leaving out the fact that car dealerships are independently owned and Wells Fargo branches aren’t, but I think the comparison is still valid. Recognizing the problem and providing a workable solution are two different things.

  54. Trai_Dep says:

    @Jeff.
    Good points all, and I don’t think that, in this day and age, WFB personnel would behave in a racist fashion. Indeed, I’m sure they’d be outraged were they to come across overt acts. But in these sorts of cases, isn’t it the results that count? Good people can do bad things if they follow a senseless (or at least tone-deaf) policy.

    I suppose that it’s moot now, sub-prime being dead as a category. And hindsight is perfect. But I think part of the frustration that I feel is that I’d have hoped that Wells Fargo’s execs would have done a cursory look at the racial breakdown, then changed policies accordingly. Especially if the (apparently) discriminatory results could have been eliminated by tweaking their program. Allow brokers in low-income neighborhoods to handle both, with neutral incentives, for instance. Or make these brokers’ commissions be the same if a customer’s loan is transferred.

    I can see non-discriminatory reasons for them not doing this (sub-prime rates paid by prime-eligible customers? AWEsome!) But this short-term gain is apparently going to cost them a small fortune in PR and potential lost lawsuits. And might be seen as less than consumer-friendly.

    • Eyebrows McGee (now with double the baby!) says:

      @Trai_Dep: “But I think part of the frustration that I feel is that I’d have hoped that Wells Fargo’s execs would have done a cursory look at the racial breakdown”

      Also, wouldn’t they have an FHA compliance officer somewhere whose JOB it would be to run down those numbers? Banks and discriminatory mortgage lending is an old story, and a smart bank is going to worry about it.

      I mean, I know HOSPITALS get a little anxious if their billing practices tend to charge different racial groups different amounts, which, again, can come from racially neutral reasons (while different insurance providers or lack of insurance may reflect racism in the community, the hospital isn’t responsible for what insurance patients bring to it, and those insurers negotiate the rates) but the EFFECT is what counts.

      I’m aware of a situation where due to a local high minority unemployment rate, a municipal hospital ends up charging most of its minority patients the “full” rate and most of its white patients the discount, insurance-negotiated rate. It has nothing to do with the hospital, but the outcome is that the hospital is basically charging racial groups differently … and they have half a dozen execs and an outside law firm running down these numbers and covering their asses six ways from Sunday.

  55. picardia says:

    This ABSOLUTELY went on. People are in here claiming the NAACP only now took notice — nope, this investigation has been going on for a long time, and anybody who claims to hold him- or herself out as an informed person about the mortgage crisis is, in fact, the person who needs to explain how they have been so ignorant about an issue that’s already been extensively covered in mainstream media. I work at a large corporate law firm — as far from “bleeding heart liberals” as you get — and some of our financial services partners have been speaking out about this for a while. (They’ve done pro bono work on it too, but I have no idea whether they are providing assistance to the NAACP in this.)

    Finally, seeing all the posts about the “race card” reminds me that there’s a much more intellectually dishonest, reprehensible way of shutting down an argument: Making racist assumptions when you’ve failed to learn even a shred of the facts.

  56. acklenheights says:

    You seriously need to chill Eyebrows McGee. Slobbering over every thread that expresses the slightest bit of skepticism doesn’t reflect well on your reading comprehension ability.

  57. thegirls says:

    @MisterE:

    You’re implying that just because we elected a black man, racism in America is automatically a thing of the past? Really?

    And if a person is taken advantage of, it’s their fault for not being accountable for, and smart enough to avoid being had? Again, really?

    Lastly, though it seems that the two of you may think alike, his opinion wasn’t the truth, nor is yours. I’d suggest that the two of you educate yourself before making crass, ignorant generalizations.

  58. thegirls says:

    @acklenheights: If a person is passionate about, or interested in the subject of a certain thread and they add intelligent insight, knowledge and input to the conversation, well then we should all be glad they’re here, contributing.

    I know that I’m not alone in looking forward to posts from Eyebrows. They’re a positive aspect of this board!

  59. larkknot says:

    The mortgage companies are REQUIRED by law to put your race on your application. If you refuse to self-describe your race, they are required by law to guess at it. This is theoretically so they can avoid discrimination, although in practice it causes more of it and only records the discrimination taking place.

  60. Trai_Dep says:

    @ankle: Eyebrows offers an informed opinion while remaining open to discuss factual differences. I see you’re offering an specious one here that is unsupported factually.
    Now, who’s adding constructively to the conversation? Jealous, much?

  61. Papa Midnight says:

    @MisterE: Are you serious?

  62. howtragic says:

    Let’s clear a few things up shall we?

    Most subprime loans were for cash-out or refinance loans. That means that the vast majority of people getting a subprime loan already owned their home. During the housing “boom,” brokers went all over minority neighborhoods looking for people who wanted to get cash out of their homes. Before the recent restructuring of home loans, most banks would not have given people cash-out loans for any old purpose. Why? Because the bank was stuck holding the paper. Enter a widespread secondary market, and ta-da – the problem of holding the paper is gone.

    This is where the problem starts for black people. Suddenly, people who have lived pay check to pay check their entire lives are told by a broker driving around their hood in a BMW that they can get $30,000. Now these people were all excited. “I can get $30,000?!” And here is where the really big problem starts.

    In the past, the bank, because they were holding the paper, would have only gotten these people a loan they were pretty sure could be paid back. Well, now that problem is eliminated. In fact, not only is it eliminated, they have an incentive to get these people the worst loan product they can sell them. Brokers would have had a huge incentive to get customers the highest interest rate because the broker was compensated based upon a yield spread premium. That means that for a 100K loan, for example, if the broker could talk you into a 10% apr instead of a 9% apr, they were compensated an extra 1% of the value of the loan. If this sounds shady, it because it is.

    The problem is that brokers “structured” loans in very creative ways to try and get that extra high APR. And here is where blacks really got screwed. Blacks tend to be quite a lot less financially literate than their white counterparts, and thus, they were more easily suckered into these bad loans. BTW, this is not a racist statement: it’s a fact. Many studies have shown that blacks and other minorities are less financially literate.

    But that’s not really the end of the problem. Even if the borrower could maybe sort of see that the loan terms weren’t all that great, by this point, they were heavily psychologically invested in getting that cash. They had already though of all the things they were going to do with it, etc.

    I do not think that any of these banks or brokers were targeted blacks. They were targeting ANYONE who could be suckered into one of these loans. Because of a number of factors, blacks were, on average, more easily scammed.

  63. Anonymous says:

    OK, I had all I can take here. Let’s say it all to gether, it’s all the Black peoples fault we are here. 29 to 32m people only in the country and about only 16% of that number own a home. Taken about (someone give me this number) 300m people in this country all together someone tell me how the blacks did all this? Think before you respond because everyone is waiting.
    One more thing, if someone purchases a home and make three years of payments on time, how is that buying a home you can’t aford? I have so much to say but you can’t win these conversations so you stay out of them as much as you can
    thanks
    LT