Discriminatory lending policies made the housing crisis worse for African-American and Latino borrowers, Federal Reserve Chairman Ben Bernanke told a financial summit held Thursday in Atlanta. The housing crisis and economic slump followed the “unfortunate pattern” of “disproportionately affecting” minorities, Bernanke said, pointing to the fact that black home ownership rates have fallen five percentage points in the last eight years, compared to just a two percent drop for the general population.
Two major discriminatory actions made the crisis worse for minorities, Bernanke said:
“One is redlining, in which mortgage lenders discriminate against minority neighborhoods, and the other is pricing discrimination, in which lenders charge minorities higher loan prices than they would to comparable nonminority borrowers,” Bernanke said.
“We remain committed to vigorous enforcement of the nation’s fair lending laws,” he added.
Studies have shown that blacks and Latinos were twice as likely to have been affected by the housing crisis as white borrowers, largely for the reasons Bernanke outlined. Many minority borrowers were pushed into riskier, more expensive subprime loans even though they qualified for lower-interest prime mortgages. Subprime loans, which can add $100,000 to the price over the life of the mortgage, were given to 30.9 percent of Latinos and 41.5 percent of blacks, compared to just 17.8 percent of whites.
Wells Fargo, the nation’s largest mortgage lender, paid $175 million to settle discriminatory lending charges in July, and other mortgage companies have been fined and ordered to pay settlements to homeowners they discriminated against.