January 15, 2008

Let's just top that racism off with a nice big scoop of sexism, too


Though women and men have roughly the same credit scores, the Consumer Federation of America found that women were 32 percent more likely to receive subprime loans than men. The disparity existed within every income and ethnic group. Blacks and Latinos are also more likely to get subprime loans than comparable white borrowers.

Unlike earlier analyses that revealed clear racism on the part of lenders -- Black and Latin@ applicants were actively encouraged by loan officers to apply for larger mortgages than White applicants of the same income and credit score, and hence got worse terms for their loans -- this article does not suggest explicit racism. Instead, blame is laid on the fact that women are generally poorer than men.

Which is rather dumb, since the analysis controls for income.

“The striking thing is that the disparity between men and women actually goes up as income rises,” said Allen J. Fishbein, director of credit and housing policy for the Consumer Federation of America. Among high earners — defined as people earning twice the median income — black women are as much as five times more likely to receive subprime mortgages than white men.

A better explanation? Not structural sexism, but good old fashioned misogyny.

Mr. Fishbein said that even at high-income levels, mortgage brokers may assume that women are less confident to negotiate or shop around, and so offer them higher rates. A survey in 2006 by Prudential Financial found that two-thirds of women graded themselves at C or lower in their knowledge of financial services or products.

The payments rates are astounding. One woman bought a $130k house four years ago. Her initial payment was $841 a month, which is about 0.65% of the principle. Assuming a 30 year mortgage, at that payment she would pay the bank just under 232% of the principle. But her payment more than doubled after 2 years, to $1769 a month. That's 1.36% of the principle. Over 30 years, she would pay the bank just under 472% of the principle, or about $613.6K.

Nearly two-thirds of a million dollars, for what sounds like a dinky little townhouse in a lower middle class neighbourhood. At an average $15 an hour, 40 hours a week, 51 weeks a year, it would take someone 20 years worth of work just to earn that much money. That's half of your life's wages, just to buy a house.

And lest you argue that `they shouldn't be buying a house if they can't afford it':

Freddie Mac and Fannie Mae, which buy loans from mortgage lenders, have estimated that 15 percent to 50 percent of the subprime loans they bought in 2005 went to borrowers whose credit scores indicated they were qualified for prime loans.

Yes, they couldn't afford the usurious subprime loans. But their credit scores say a significant percentage could have afforded prime loans.

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