Discrimination hits home: The debacle over poorly regulated subprime mortgages disproportionately affects minorities

There's a high price to pay for racial discrimination in any form, but it is especially clear in the case of subprime lending practices. Loans made at higher interest rates and less favorable terms to those considered high-risk or with little or poor credit history - loans that disproportionately affect minorities - are causing a house-of-cards tumble in the housing industry.

That affects everyone, including residents of Houston, where home building is slowing for the first time in a decade. A midyear prediction anticipates a 20 percent decline from last year, attributed to the subprime debacle. And the edginess on Wall Street over the collapse of two large hedge funds is keeping the rash of subprime foreclosures a national and international concern. Much attention is focused on how to clean up the subprime market.

What has yet to occur and needs to occur is a reckoning with the blatant institutional racism that has been integral to the abuses. A 2006 report by the Consumer Federation of America revealed that 53 percent of black borrowers and 37.8 percent of Hispanic borrowers receive subprime loans, compared to 21.6 percent of white customers and 13.5 percent of Asian. In many instances, the minority borrowers were steered to subprime loans when their credit history might have permitted more favorable terms.

This pattern cannot be explained by income or credit scores, according to Evan Fuguet, policy counsel for the Center for Responsible Lending, an organization that has been watching this issue for a decade. The center is calling for more aggressive regulation and sanctions for loan originators and brokers that exploit and discriminate.

In testimony to Congress this week, Wade Henderson, president and CEO of the Leadership Conference on Civil Rights, a coalition of 200 national organizations, said the Federal Reserve has flagged 270 institutions for potential fair lending violations, yet no cases have been brought or public actions taken by any of the federal entities with enforcement responsibilities.

Henderson urged Congress to hold hearings on the failure of federal regulators and the U.S. Department of Housing and Urban Development to adequately enforce fair housing laws.

He said that by not preventing lenders from being driven into the arms of abusive subprime lenders, rather than obtaining more affordable products, the federal regulators failed not only the borrowers but all affected by this messy situation.

Statistics amassed by a wide variety of federal entities and consumer organizations reveal race to be a factor in what should be purely a credit transaction. Housing discrimination has surfaced in yet another form that must be confronted.

The failure of federal regulators to do so is as significant as the abuses themselves.

Brought to you by the HoustonChronicle.com