New Study: Minorities Pay More on National, Florida Mortgage Loans

There are troubling discrepancies in Florida home mortgage refinancing: minorities are paying higher rates during this process than other borrowers.

According to a new study, this difference doesn’t merely take place when refinancing is on the table; African-American and Hispanic borrowers remain much more likely than whites to pay high interest rates on all Florida mortgage loans, the Federal Reserve reveals.

The report is based on data collected each year under the Home Mortgage Disclosure Act (HMDA), a poll taken of 8,850 lenders nationwide. Under that law, lenders must release pricing disclosures for home loans whose interest rate exceeds certain thresholds. For first-lien loans, lenders must report those on which the rate exceeds the yield on comparable Treasury securities by at least three percentage points.

In 2005, about 55% of first-lien Florida home loans to African-Americans exceeded that threshold, compared with 46% for white Hispanic borrowers and 17% for non-Hispanic whites. Lenders and bank regulators say the disparities largely reflect differences in incomes and credit histories. Even so, regulators look at the data from individual lenders for indications of possible race discrimination.

Critics of the mortgage industry say one problem is that loan officers and Florida mortgage brokers often earn higher fees for persuading borrowers to take higher-cost loans. Minority borrowers, who often have less experience in home buying, may be less skilled in negotiating over loan terms and shopping among lenders.

Keith Ernst, senior policy counsel for the Center for Responsible Lending, a nonprofit group in Durham, N.C., said the latest numbers reinforce the case for lenders to use only objective criteria for setting rates and fees on Florida home mortgages rather than giving loan officers and brokers leeway to negotiate those items with borrowers.

Overall, 26% of all 2005 loans reported by lenders exceeded the high-cost threshold, up from 16% in 2004.