WASHINGTON — African Americans and Hispanics are far more likely to receive high-cost home loans than whites -- and although much of the disparity can be tied to economic factors, the reason cannot be fully explained by existing data, according to a government analysis released Tuesday.
The study by the Federal Reserve examined an estimated 80% of all home loans last year. It found that 32.7% of African American borrowers, and 20.3% of Hispanic borrowers, had high-priced loans.
By comparison, 8.7% of white customers and 5.9% of Asian Americans had these higher-cost mortgages, also known as sub-prime loans.
The report said that economic factors, such as the income level of the borrower, were one factor in the disparity.
"More troubling," the study stated, "these patterns may stem, at least in part, from borrowers being steered to lenders or to loans that offer higher prices than the credit characteristics of these borrowers warrant."
Fair-lending advocates said the report provided new evidence that minority group members were targeted for sub-prime loans.
John Taylor, president and chief executive of the National Community Reinvestment Coalition, said the report was using "Fed speak" to say "that people of color are significantly more likely to get a higher-cost loan than their white counterparts."
The report "cannot explain significant racial and ethnic differences that remain between how minorities and whites are treated in terms of high-cost, non-prime loans," Taylor said.
A federal council, however, cautioned against reading too much into the study.
The data that were used in the study "do not include certain determinants of credit risk that some lenders consider in pricing mortgage loan products, such as the borrower's credit history ... and consumer debt-to-income ratio," said the Federal Financial Institutions Examination Council, which compiles data for the Fed and other government agencies.
Some in the mortgage industry have resisted adding such questions to the government survey, however, claiming that such details could potentially compromise borrowers' privacy and push up lenders' costs.
Mortgage lenders have long maintained that getting lower-cost prime loans is based on factors such as income and credit history, and not on race.
The new study bolsters that argument by showing that the disparity between whites, blacks and Hispanics diminishes when adjusted for other factors, such as income, said attorney Joseph T. Lynyak III of law firm Reed Smith, whose clients include lenders.
