Here is the kind of news that really gets me mad and makes me wonder if we are really in the 21st Century. The National Association for the Advancement of Colored People (NAACP) has filed a lawsuit against some of the biggest lenders in the area accusing them of racial discrimination. Why? Apparently, these lenders have been partial to their white clients giving them favorable loan terms, while burdening black clients with higher-interest subprime loans. The suit, filed in U.S. District Court in Los Angeles, is seeking class-action status, according to an Associated Press news report.
The lawsuit is also asking that the court order the 11 lenders named in the complaint not to discriminate against blacks, an order which would mandate them to comply with fair housing and credit laws. Well, I thought it was already illegal and unconstitutional to discriminate based on race. Here are some of the alleged offenders – Washington Mutual, Citigroup and Ameriquest Mortgage Co., a unit of Orange County-based ACC Capital Holdings, which is one of the country’s largest sub-prime lenders.
Sub-prime loans attract high-risk borrowers with questionable credit history. Those who get these loans usually wind up with higher interest rates than other borrowers. But the lawsuit maintains that black homeowners who got these loans in 2004 were 30 percent more likely to get slapped with higher interest rates than white borrowers, all other parameters being equal. This is according to a 2006 study by the Center for Responsible Lending. Recently, the Federal Reserve Board also concluded blacks were more likely to pay higher prices for mortgages than whites, according to the suit.
According to an NBC news report, other companies named in the lawsuit are — HSBC Finance Corp.; Bear Sterns Residential Mortgage Corp.; First Franklin Financial Corp.; Lehman Bros. Holdings subsidiary BNC Mortgage Inc.; Accredited Home Lenders Inc.; H&R Block subsidiary Option One Mortgage Corp.; General Electric-owned WMC Mortgage Corp.; and Fremont General Corp.’s Fremont Investment & Loan.
Continue reading →