It has been reported that many of the largest banks in the U.S. discriminated on a regular basis against minority borrows. One of the most pernicious practices in which these banks engaged during the lead-up to the financial crisis, was pushing minority borrowers into subprime loans. This was done even when many of them clearly qualified for prime loans. Many believe Wells Fargo was one of the worst offenders, with bank officials calling the subprime loans that it pushed in poor, black neighborhoods “ghetto loans.” There is no doubt that this rampant predatory lending helped inflate the housing bubble. A Center for American Progress investigation found huge racial disparities in lending at the big banks that wound up getting bailed out, with minority borrowers far more likely to receive high-priced loans.
A former banker for Chase — James Theckston — told Nicholas Kristof, a New York Times columnist, that not only did his bank push minority borrowers into higher-priced loans, but senior executives then tried to cover up the racial disparity in their banks’ lending. Theckston says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages, so they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and pushed them into subprime loans.
Theckston said that these “less savvy borrowers were disproportionately blacks and Latinos,” and “they ended up paying a higher rate so that they were more likely to lose their homes.” Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up. Mr. Theckston explained it this way:
The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.
In 2006, Chase made high-price loans to 16.4 percent of white borrowers, while nearly half of black borrowers and more than one-third of Hispanic borrowers received high-price loans. These disparities help explain why, according to a new report from the Center on Responsible Lending, Latinos and blacks are twice as likely to have been impacted by the housing crisis as whites. In fact, “approximately one quarter of all Latino and African-American borrowers have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers.”
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