Minorities Steered to B&C?

Home Mortgage Disclosure Act data in 2006 analyzed by various customer advocate and mortgage industry entities show that the subprime mortgage meltdown has primarily affected minority buyers who received most of the risky loans and are about to disproportionately suffer the consequences.

After analyzing the HMDA data in its 2006 Peer Mortgage Data for lenders, Wolters Kluwer Financial Services, a risk management and compliance technology provider based in Minneapolis, reached the same conclusion.

The Peer report notes, "Minorities, particularly blacks and Hispanics, comprise significantly higher percentage of borrowers paying high-cost loans as compared to whites. This was found to be true even when comparing for the borrower related factors, such as loan amount and location, and lender-related factors, such as loan programs, present in the HMDA data."

Similarly, "The 2007 Annual Minority Lending Report," prepared by Compliance Technologies and Genworth Financial, released at the 3rd Annual Mortgage Lending Industry Emerging Markets and Diversity Conference found that in 2006 subprime lending "was most prevalent with African-American borrowers" who received 48% of all subprime loans, followed by Hispanics with 42% and Asian-Americans 17%.

"The momentum we've been seeing in minority homebuying unfortunately came to a halt in 2006," said Maurice Jourdain-Earl, managing director of Compliance, a Washington-based emerging markets and mortgage lending compliance consulting firm.

The executive called the findings on the level of subprime lending to minorities troubling, since in 2006 nearly four out of every 10 mortgages extended to all minorities were subprime.

Using newly released HMDA data, the Compliance-Genworth report analyzes national minority home purchase loans during the 2005-2006 period, compared to white borrowers, and examined what percentage of new purchase loans to African-American, Hispanic and Asian-American borrowers were subprime.

"Many minorities who took out a new mortgage last year are financing their home with a subprime loan," said Kevin Schneider, U.S. mortgage insurance president at Genworth. In 2006, African-American homebuying increased in 26 states compared to 2005.

Meanwhile homebuying by white buyers increased in only five states. However in 12 states, over 50% of all mortgage loans to African-Americans in 2006 were subprime loans.

At the top, with the highest percentage of subprime loans to African-Americans in 2006, was at Michigan 70.7%, followed by Wisconsin at 61.6%, Missouri at 59.4%, Illinois at 58.8% and Indiana at 57.4%.

Additionally, according to the Compliance-Genworth report, in 2006 mortgage lending to minorities decreased 7%. The decrease, however, was across the board. "Minority groups and whites experienced a decline in homebuying last year compared to 2005," the report found, except for 0.6% growth among African-Americans.

Utah, Texas, New Mexico, Oklahoma and Louisiana top the list of states that instead experienced minority homebuying growth from 2005 to 2006.

Asian-American buyers experienced the greatest decline among minority homebuyers at 21%, while Hispanic homebuying decreased by 5.2%.

The report highlights that even though from 2005 to 2006 homebuying among Hispanics declined by 5% nationally, "Hispanics did outpace any other minority group" in 2006 with 692,014 loans, followed by African-Americans with 448,082.

The highest growth, by 21.6%, was reported in North Carolina, which was closely followed by South Carolina, Utah, North Dakota and Louisiana. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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