The U.S. Department of Housing & Urban Development (HUD) has announced that it is launching multiple investigations into the practices of certain mortgage lenders to determine if their home loan policies illegally deny qualified African-American and Latino borrowers access to credit.
The investigations are in response to 22 complaints the National Community Reinvestment Coalition (NCRC) filed with HUD alleging that the loan activities of the mortgage originators showed that their home lending practices deny Federal Housing Administration (FHA)-insured loans to African-Americans and Latinos with credit scores as high as 640. FHA guidelines allow mortgages to borrowers with credit scores above 580, provided the borrowers have downpayments equaling 3.5 percent of the loan amount, or above 500, provided the borrowers have down payments equaling 10 percent of the loan amount.
“FHA is an important vehicle for Americans who want to purchase or refinance a home. We thank NCRC for bringing these complaints to HUD. For lenders to deny responsible home seekers this source of credit, without regard for their capacity to repay the loans, would raise serious fair housing concerns and, if proven, undermine our nation’s recovery efforts,” said HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña. “HUD will take appropriate action against any lender found to be engaging in discriminatory practices.”
Prior to the recent downturn in the economy, FHA-insured mortgages comprised less than three percent of new home loans. Since the economic crisis, FHA and the government-sponsored enterprises (GSEs) have insured or guaranteed nearly 95 percent of new mortgage loans being originated. By the end of 2008, almost half of new home purchase loans and one quarter of new refinance loans were FHA or Veterans Administration (VA) insured.
According to NCRC, an association of more than 600 community-based organizations that promote access to basic banking services, their fair lending “testers” evaluated the practices of national lenders, financial services corporations, and other regional and local FHA-approved lenders. In the complaints filed, the NCRC states that lenders were chosen according to their market share and volume of FHA loans, as well as through discussions with community leaders.
Under the Fair Housing Act, HUD impartially investigates allegations of housing discrimination and, during every phase of investigations, attempts to settle complaints through conciliation efforts.
For more information, visit www.hud.gov.
