Do minorities pay more for mortgages?
Fraud and scamming in the
real
estate and mortgage industry
has been making a lot of news lately. Many groups have
been claiming that minorities and other groups have been
cheated by brokers and lenders alike.
In the article, “Why do minorities pay more for
their mortgages?” Jack Guttentag from Inman News
looks into the accusations that some groups are making
against lenders and brokers.
Guttentag claims that there are many ways which borrowers
have the power to derail predatory lenders, and he says
he does not believe that lenders intentionally charge
more to minorities.
He makes a note that over 90 percent of mortgage
transactions involve a two-step process: “The
first stage, the development of posted prices that are
delivered to loan officers and mortgage
brokers, is bias-free. The unequal treatment of minorities
occurs in stage 2, where posted prices are converted into
the final prices paid by borrowers. A sizeable number
of loan officers and brokers charge what the market will
bear, and minorities end up paying more because they are
more vulnerable. Lenders may commit many sins, but I don't
believe that discrimination against minorities is one
of them.”
Guttentag advises that the reason why many people are
mistreated or scammed by lenders or any type of mortgage
transaction is because they are uninformed of the processes
involved with taking out a mortgage.
If a person is well informed on the home buying process,
they are way less likely to get scammed then someone who
has no idea about the process.
“This conclusion can be interpreted to mean that
the victims are partially responsible for their own mistreatment.
In my view, this interpretation is sometimes unavoidable.
Borrowers are victimized primarily because they are ill
informed, and given that the information that would protect
them is widely available, they bear some responsibility
for not finding and using it.”
He also advises that these groups should spend more time
educating people about the good people, and spend less
time focusing on the lenders who are the so-called “villains”
or “bad guys.”
“I wish the community groups did a better job of
advising their constituents about how to avoid trouble.
Their advice is mainly directed at how to identify the
bad guys, which is the wrong approach. There are too many
bad guys, and they are too good at disguising their true
nature.”
All in all, Guttentag recommends finding only lenders
where no exploitation has ever taken place, and this will
drive the competition from the others bad people. Also,
he recommends finding a mortgage broker with an all-in
fee.
“Another way to avoid discrimination is to negotiate
an all-in fee with a mortgage broker, the fee to include
any payments received by the broker from the lender. While
most brokers don't work that way, preferring to keep their
markup their own business, most of them will if the borrower
insists on it. (Upfront Mortgage Brokers, who are listed
on my site, work this way as a matter of course). The
borrower has the clout to dictate the terms of his engagement
with the broker, if only he realizes it.”
“If the CRL and other community groups guided borrowers
to lending channels where they would not be exploited,
these channels could become the dominant delivery systems,
and the channels where predators operate would shrink.
This would require nothing of government, whose track
record in protecting mortgage borrowers is very poor.”