Racism and sexism in lending practices

At the risk of being accused of being labeled a troll, it takes two to tango.

Is there some evidence that women or minorities were flatly denied regular loans? If so, you might have a case here (with the usual caveat that few people absolutely must get $400,000 in debt because they're deathly allergic to renting). If not, then we seem to be looking at a case of certain people not reading the fine print.

I don't say the lenders are blameless here, but I seriously doubt anyone put a gun to someone's head and said "YOU'RE TAKING THIS EXPENSIVE LOAN, (racist or sexist epithet omitted)!"

You say that lenders perceived women and minorities to be better targets for sub-prime loans. Considering that loans are voluntary agreements, I'd say it looks like they were right. Again, unless women or minorities were categorically denied fixed rate loans, I'd say this was mainly a case of targeted marketing. Kind of like how they market horrendously overpriced white dresses to engaged women, or how they market loud, big-budget action movies to 17-30 year old men.

A client goes to a lender. The lender examines their credit and willingness to pay, then offers a product that fits their ability and willingness to pay. Perhaps, women and minorities just happen to have lower FICO scores, and less cash on hand for a down payment, thus opted for a subprime loan.

These comments strike me as naive. There are a lot of ways to take advantage of someone's trust without holding a gun to his or her head. Plus, there is a lot of research that so-called "objective" lending standards screen out African Americans who are perfectly able to repay, just because they show a different employment history and pattern of using credit than white borrowers. I'd be willing to bet there's similar discrimination going on against women: probably unintentional, but effective nonetheless.

The preponderance of the evidence suggests that minority and female borrowers are given worse choices than white male borrowers, even when their income is high. Some of the inequity can be attributed to poor credit management, but it does not explain the phenomenon. At least some, if not a large part of this trend must include borrowers who were given only the more expensive (subprime) options because the loan officer thought, correctly, that this borrower would hesitate to shop around.

That’s how discrimination works. It capitalizes on the powerlessness that someone in a minority position has experienced. Someone with a good income, who feels like he/she has options, will shop around. Someone used to hearing “no” will not. Women and minorities are disproportionally in the latter category.

I won’t call you “trolls” if you don’t call me a “flaming liberal.”

As a real estate broker and lawyer, my experience has been that men, women, minorities, educated and not-so-educated people all are victims of lousy loans.

Unethical mortgage brokers don't discriminate. They'll take advantage of anyone, if they have the opportunity.

How do I know when a client is going to get a lousy loan? When they say they're working with "a friend." It never fails. Those situations almost always are the worst loans. It's sad, but true.

In addition, it doesn't have to be a so-called subprime loan to be a lousy loan. Consumers pay needless points, ridiculously high closing costs and interest rates above market rates on boring, vanilla conventional loans all the time.

Hi Rich,
You make a good point that bad loans are not all subprime. However, the statistics show a disproportionate number of minorities and women who choose to trust that "friend" who hands out bad term mortgages. Are these borrowers somehow naive, or is it that they have experience in the world that says that their options are limited? People who feel powerful will shop around; those who expect little, settle for less. The unethical lenders certainly know this, it is good for their business.

I believe that is one way that discrimination works.