Do lending institutions in the US really give higher mortgage rates based on the race of the applicants?

Deal Score0

I don’t doubt that more sub prime loans went to minority applicants, but isn’t it based on their credit and finances?

I’ve financed 2 homes over the last 5 years and I don’t recall being asked about my race or ethnicity. How would my lenders even know that I’m 1/2 Native American (both my loans are conventional by the way- no subprime or ARM junk)?
Both transactions were done through a broker (not the lender). Like I said, I sure don’t remember being asked about my race. I guess I could’ve been asked to check a box and just don’t recall.

  1. Reply
    February 12, 2011 at 11:02 am


    However, lending institutions do take into account various factors such as ratios of debt to income, net wealth, etc. They do this because those factors have been shown to have a relationship to how likely it is that the applicant will or will not pay the loan back.

    And some of those factors, in turn, are different — on average — between the races. There is also some evidence that financial literacy differs between the races, so that some are more likely, on average, to sign up for a loan whose terms are worse than the best the applicant could get by shopping around.

    So if you hear someone talking about the banks or mortgage companies being racist, it is this indirect effect that they are most likely talking about.

  2. Reply
    February 12, 2011 at 11:04 am

    Actually it’s very interesting that you were not asked about your ethnicity. When providing a loan, the lender is required to identify the race of the applicant and submit it with the application in order to be certain that the bank is complying with fair lending laws. In fact, if they ask and you refuse to answer, they have to guess your ethnicity by appearance and submit it. If they’re not asking, however, it does make me wonder if perhaps they’re altering the correct ethnicity…

  3. Reply
    ann h
    February 12, 2011 at 11:04 am

    no that is soooo illegal!

  4. Reply
    Real Estate Guy
    February 12, 2011 at 11:46 am


    Mortgages are based on credit score, income and debt.

    Now it could be argued that some races have problem in these areas because of racism. But ?????

    I have done over 2 thousand sales in real estate and I can say that I have sold to just about ever race. And I have found that some races DO have problems more then others.

    Just look in the news paper on foreclosures. Most of the names are in some races.

  5. Reply
    February 12, 2011 at 12:31 pm

    To say that would be to charge those institutions of doing something illegal. But prejudice is often thinly veiled. They say that redlining is illegal for insurance companies and yet they charge outrageous prices for certain neighborhoods or refuse to insure in that neighborhood and that is the definition of redlining. I think there are always those that will do what they think they can get away with for their own personal reasons.

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