Jonathan J. Higuera

Good credit score? Too bad

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As the debate rages on about who deserves more blame for the nation’s housing crisis – homeowners, who blindly took on bigger loans than they could afford, or mortgage lenders, who recklessly gave outsized loans to those not qualified for them – the evidence continues to mount that the hardships created by the housing mess continue to fall disproportionately on Latinos and African-Americans. 

Take, for instance, a Wall Street Journal analysis that found that more than half of all high interest rate loans went to borrowers who should have qualified for prime rate mortgages. Data suggest that while 6.2 percent of white borrowers with credit scores of 660 and above were placed in higher interest rate loans, more than 19 percent of Latinos and 21 percent of African-Americans with similar scores received higher rate loans. The company that created the FICO score classifies scores of 660 and above as “good.” 

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This, in turn, led to an increased likelihood that they would face foreclosure. 

In December, Bank of America (BofA) settled a complaint filed by the U.S. Department of Justice alleging that mortgage lender Countrywide Financial, one of BofA’s subsidiaries, discriminated against Hispanic and African-American borrowers for “reverse redlining,” which is described as the practice of targeting minority borrowers for higher interest loans even when they deserved better terms based on credit scores and credit history. 

The $335 million settlement will be divided among 200,000 identified minority homeowners who were the victims of predatory lending. 

In a policy brief, the Washington, D.C.-based Economic Policy Institute maintained that the discriminatory practice extended well beyond Countrywide. Furthermore, the effect has been bad for U.S. society in general, even beyond losing a home. The consequences have led to further segregation, as former homeowners have had to move back to poorer areas, leading to elevated family stress and lower academic achievement for children who often find themselves back in under-resourced, lower-performing schools.

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