Magazine article American Banker

On 1st Mortgages, Blacks PayAbout Same Rates as Whites

Magazine article American Banker

On 1st Mortgages, Blacks PayAbout Same Rates as Whites

Article excerpt

A new study finds that whites and blacks pay almost identical interest rates for home mortgages, although minorities pay substantially more when they refinance.

The study, conducted by the Federal Reserve Bank of Chicago and published in the July issue of the Chicago Fed Letter, appears to support industry claims that banks price first mortgages fairly, but it also provides fodder for critics who claim banks discriminate on second mortgages.

"The fact that there is a reduction in the overall statistical disparities is good news," said Deval L. Patrick, a partner in the Boston office of the Day, Berry & Howard law firm and a former assistant attorney general for civil rights. "But is it good enough news to declare victory and move on? No, that would be premature."

Paul F. Hancock, the acting deputy assistant attorney general for civil rights, said the refinancing data indicate that additional prosecutions may be warranted.

"The differences in rates charged to minorities compared to nonminorities is disturbing," Mr. Hancock said. "There may be a business justification for it, or it may be because of unlawful discrimination based on race."

The Justice Department has sued seven banks since 1993 for charging minorities more than whites.

The study found that minorities paid on average 8.1% for first mortgages in 1996, about 20 basis points more than whites. "We saw that difference as so small we didn't need to worry about it," said Paul Huck, a Chicago Fed economist who co-wrote the article with colleague Lewis M. …

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