Search


Subscribe to AFM


Subscribe to AllFinancialMatters
by Email

All Financial Matters

Promote Your Page Too

The American's Creed

Site Sponsors

Books I Recommend


AFM in the Media


Money Magazine May 2008

Real Simple March 2008

Blogroll (Daily Reads)

« | Main | »

Haven’t We Been Down This Road Before?

By JLP | January 30, 2012

I read this last Friday in the WSJ: The Loan Quota Rule

For the latest example of regulatory overreach, look no further than the Department of Housing and Urban Development, which is pushing through a rule to support racial loan quotas a few months before the Supreme Court will rule on whether that’s legal. The Obama Administration’s “fair housing” agenda, apparently, just can’t wait.

At issue is the 1968 Fair Housing Act, which prohibits discrimination “because of race, color, religion, sex, handicap, familial status, or national origin” (our italics). The language clearly implies an intent to discriminate. But courts have brushed the pesky text aside over the years, citing language in other 1960s-era statutes that allows the use of “disparate impact” analysis, which doesn’t require intent and relies instead on statistical data about lending outcomes over larger populations of borrowers.

That prohibition against discrimination is not the same thing as quotas. I’m all for fair lending standards. If a person qualifies for a mortgage based on finances, then they should be able to get the loan. However, I am 100% against giving them a loan in order to meet some sort of racial quota regardless of whether or not they can afford the loan. It seems as though we have been down this road before.

Thoughts?

Topics: Housing Market | 6 Comments »


6 Responses to “Haven’t We Been Down This Road Before?”

  1. BG Says:
    January 30th, 2012 at 12:15 pm

    I agree, quotas based on race (among others) is still discrimination, just reversed. All else being equal, mortgages should have the same racial ratios as the general population. If those ratios dont match, then something is afoot. Take for example prison population ratios (based on race) and compare to the general population of the US…

  2. Russ Says:
    January 30th, 2012 at 12:49 pm

    There is no racial discrimination with mortgages. I am black and also a mortgage lender.

    The statistics imply discrimination but gloss over the nuances of why certain groups are more or less represented in mortgage lending.

    Any discrimination is done at the individual loan officer level when it comes to mortgage pricing, but underwriting is colorblind. The other thing is that often times, the LOs that do take advantage of minority groups tend to be minorities themselves which of course you will never see mentioned in any study.

    For example, I knew of some small lenders that targeted hispanic borrowers. All the staff was hispanic and they absolutely charged the maximum they could legally get away with because the borrowers rarely spoke english and trusted the LOs based on their relationship/commonality with their culture.

    Instead of quotas, the focus needs to be on education minority consumers so they are better prepared to be homeowners.

  3. Jack Says:
    January 30th, 2012 at 6:07 pm

    > All else being equal, mortgages should have the
    > same racial ratios as the general population.

    Of course, all else is NOT equal.

    One question is, for a given income level and down payment percentage, are Blacks more or less likely default than Whites?

    > If those ratios don’t match,
    > then something is afoot.

    It would be interesting to get the raw data to see whether there is a mismatch.

    > Take for example prison population ratios
    > (based on race) and compare to the general
    > population of the US…

    Not really relevant. What’s your point?

  4. BG Says:
    January 31st, 2012 at 6:17 am

    The point is, if they put the same quotas on prison population that they are trying to do with mortgages, then one of two things will happen:

    1) a massive increase in the number of white people in prison

    or 2) a massive release of minorities from prison.

    to get the ratios back to the level its the general population.

    “One question is, for a given income level and down payment percentage, are Blacks more or less likely to default than Whites?”

    No, the question should be: for a given income level and down payment percentage, are minorities more or less likely to be put into a subprime (or similar bad loan), than Whites? See Russ’ point in #2 above.

  5. Jack Says:
    January 31st, 2012 at 6:44 am

    Both questions are of interest.

  6. Stacey Says:
    January 31st, 2012 at 9:20 am

    Well, I’d get lots of reading time and someone to cook for me. Probably more action, too :)

Comments