African Americans Get Higher Loan Rates

released on 05/31/06 at 16:16:36

NEW YORK (CNNMoney.com) - African-Americans and Latinos are 30 percent more likely to receive higher rates for home loans than white borrowers despite similar credit scores and risk factors, according to a study published Wednesday by The Center for Responsible Lending.

The Center for Responsible Lending's study found that African-Americans and Latinos face different levels of pricing disparities when compared with white borrowers. African-Americans were more at risk when the subprime mortgages included a prepayment penalty. African-American borrowers were 31 percent more likely to receive a higher rate on a subprime fixed home mortgage while they were 15 percent to 16 percent more likely to pay more to take out an adjustable rate mortgage.

African-Americans also faced pricing disparities when it came to refinancing their existing homes. Two-thirds of refinancing loans include prepayment penalties, putting African-Americans at a significant disadvantage to their white counterparts. The study found that lenders tended to offer African-American borrowers 34 percent higher rates on fixed-rate refinance loans and 17 percent higher on ARM refinance loans. Full Article