NAACP joins effort to stop mortgage bias

By KRISTY EPPLEY RUPON - krupon@thestate.com

The S.C. State Conference of the National Association for the Advancement of Colored People joined a national Day of Action this week against discriminatory mortgage lending practices.

The national NAACP filed a class action lawsuit a year ago against 17 of the nation’s largest lenders alleging African-Americans were given higher mortgage interest rates than others despite having similar credit records, income and other qualifications.

Following are three questions with Dwight James, executive director of the S.C. NAACP, and James Fleshman, Midlands Director for the S.C. Mortgage Brokers Association.

DWIGHT JAMES

Why did you decide to join the National Day of Action?

“We know that the incidents of foreclosure have impacted South Carolina communities to a high degree and have a particularly negative impact on African-Americans that live in South Carolina. We thought it was appropriate for us to stand with the national (association) and put additional pressure on those mortgage lenders, some of whom operate in South Carolina.”

The NAACP is calling for these lenders to make amends. Is there a proposal on the table?

“We’re taking it to court, one, to seek relief on behalf of those that have been discriminated against. That relief might come in many forms.” For example, some subprime loans could be refinanced into conventional loans for people who should have qualified originally for a conventional mortgage with a lower interest rate, James said. Or subprime borrowers who “received even higher interest rates than their white counterparts that were similarly situated” could be given lower rates.

How many people do you think have been affected in South Carolina?

James referred to a study by the Center for Responsible Lending that said 1,028 homes in Richland County have been lost to foreclosure on subprime loans originating in 2005 and 2006. That led to more than 32,000 nearby homes losing value, with an average decrease in home value of $1,251, according to the study. Statewide, the study said, African-Americans received 52 percent of subprime loans in 2005 and 2006, compared with about 40 percent for Latinos and 19 percent for whites.

JAMES FLESHMAN

What is the mortgage industry’s response to the lawsuit?

“I am not aware of widespread discrimination. Of course, that would be something we would take very seriously. ... We want to make every loan that we can.” Fleshman said a state measure that attempted to address some of the issues passed the Senate last session but stalled in the House. But the act — being pushed also by the S.C. Department of Consumer Affairs — probably will be reintroduced next year.

How would the bill address shady practices in the lending industry?

The Mortgage Lending Act, which was endorsed by the mortgage brokers association, would establish a national registration for all those involved in the mortgage lending business, Fleshman said. That would make it easier to keep track of brokers with bad track records who move from state to state, he said. It also would provide for the collection of more data about applicants in the mortgage lending process. But he said rooting out discrimination is hard. “The issues are either in somebody’s heart and mind, and it’s very hard to root that out.” He advised people to do business with somebody they know or a trusted recommendation. “Lenders get painted with a broad brush. Obviously, there are lenders that do bad things. ... Most people are making loans in a constructive way that helps folks get in where they can.”

The NAACP cites several recent studies that they say prove discrimination. What is your response to that?

Fleshman said there have been studies that listed Greenville and Charleston as hot spots for mortgage discrimination. But he is concerned some of those studies are drawing conclusions without having enough data to support the conclusions. For example, he believes some of the reports base their conclusions on interest rate and race alone and don’t take into account credit score and debt-to-income ratio. “There are a lot of factors in a loan process,” he said.