Can racial disparities in lending be fixed?

Strengthened laws, lawsuits seen as tools to get home loans

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By Ken McCall, Staff Writer Updated 12:40 AM Sunday, May 2, 2010

Serious racial disparities in home loans uncovered in a recent Dayton Daily News examination won’t be fixed unless Congress enacts tough reforms designed to shield consumers from unfair lending practices, according a cross-section of advocates and housing experts.

However, area lawmakers are not in lock-step on how to proceed, or even whether to inject more federal regulatory control.

The newspaper found that blacks were denied loans and were sold high-cost loans significantly more often than whites with comparable incomes, and even high-income blacks were denied loans at a higher rate than low-income whites.

Among the changes called for by advocates:

• Create a strong, independent consumer finance protection agency — currently the subject of fierce partisan debate in the U.S. Senate.

• Expand the Community Reinvestment Act, which examines the lending record of banks and issues annual report cards, to include mortgage brokers and other nonbank lending institutions.

• Pass a strong national foreclosure prevention program.

• Collect more data about home loan applications to improve transparency.

“This is a problem that deserves action on several levels,” said Charlene Crowell, spokeswoman for the nationwide, nonprofit Center for Responsible Lending. “I think communities of color are entitled to answers as to why this keeps recurring when there are laws on the books.”

Jeff Quayle, vice president and general counsel of the Ohio Bankers League, said the newspaper’s findings “certainly warrants further discussion and investigation.” But, he said, all loans are individual decisions based on individual loan applications, and not on race.

Quayle said the league supports an expansion of the CRA because it currently exempts competing nonbank mortgage lenders. But it opposes the other proposals, including the consumer finance protection agency. One of his objections: cost.

“How many costs do policy makers want to heap on the banking industry?” he asked.

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