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NAACP Files Predatory Lending Lawsuits Alleging African Americans Were Steered Into Unfair Loans

May 4, 2009

The NAACP has sued two major mortgage lenders, alleging that they steered a disproportionate number of African-American home buyers into subprime loans, the Los Angeles Times reported March 13. The civil rights organization accused Wells Fargo Bank and U.K. bank HSBC of "systematic, institutionalized racism" in their mortgage lending decisions. Both banks defended themselves vigorously against the charge. The lawsuits are likely to be joined with an existing NAACP suit against other subprime lenders, including Ameriquest, Option One Mortgage and Fremont Investment & Loan, all based in Orange County.

The lawsuits grow out federal and private studies showing that African-Americans are likely to be offered higher interest rates than white borrowers, even when they have similar incomes and backgrounds. One study found that African-Americans were 31% to 34% more likely to have higher-rate loans; other numbers show that African-Americans paid 2.3 percentage points more than whites in subprime loans and 1.3 percentage points more in prime loans. Meanwhile, a federal study found that African-Americans were 3.3 times more likely than whites to be in foreclosure, even after controlling for income and credit score. The NAACP lawsuits don't ask for financial damages; instead, they want the lenders to change their ways and open their records to the public to prove it.

As Anaheim predatory lending attorneys, we are disappointed, but not surprised, that race continues to affect how home loans are made. Since the foreclosure crisis began, many consumer advocates have criticized lenders' use of subprime mortgages to get people into homes they couldn't afford using a traditional prime loan. Lenders could sell these high-profit loans as securities, so they -- along with mortgage brokers and others in the lending chain -- had an incentive to sell more. Racist perceptions of African Americans could easily have led into assumptions that they were good candidates for subprime loans, even when they could have qualified for much safer prime loans. Meanwhile, borrowers who had little way to know better trusted these name-brand lenders to offer them a reasonable deal.

Subprime loans offered on the basis of race are not exactly mortgage fraud -- but they violate federal and state civil rights and housing fairness laws. At Howard Law, our Garden Grove predatory mortgage lending attorneys vigorously defend the rights of clients who were entrapped into unfair loans, whether or not racism was a factor. We have helped many clients stay in their homes by having their unfair loans declared void and unenforceable, and winning back all of the costs of the unfair loan, including closing costs, mortgage payments and attorneys' fees.

If you have bought or refinanced a home in Southern California in the past few years and you believe you were deceived, we may be able to help. To set up a free, confidential consultation with our Santa Ana predatory mortgage lending attorneys, please contact us online or call 1-800-872-5925 today.