13 December 2004
Breaking the cycle of rent
The Oklahoman reports this morning that despite low mortgage-interest rates, 31 percent of black and Hispanic customers failed to qualify for conventional home loans during 2003, versus 23 percent of American Indians, 15 percent of whites and 12 percent of Asians.
This does not indicate any pattern of discrimination among lenders: the practice of "redlining" refusing to make loans in presumably-undesirable areas is essentially extinct. It does, however, indicate that black and Latino borrowers tend to have poorer credit scores. (Not that mine is all that wonderful.)
While no one has made a case that the scores themselves are discriminatory, it's reasonable, I think, to assume that not everyone understands the scores, and the factors that contribute to them, equally well. The Oklahoma Homebuyer Education Association, a joint venture of lenders and community groups, is working to upgrade people's knowledge of what it takes to qualify for a mortgage.
Lenders, to their credit, have been coming up with alternative mortgage programs to reach more buyers. (Disclosure: I took advantage of one such program myself, a pilot program by a major lender, directed at people with okay credit scores but iffy prospects for substantial down payments.) The upside, of course, is more homeowners, which means more people with tangible assets, and which, because people have more of a stake in their community, ultimately means better neighborhoods. This may be somewhat easier in Oklahoma, with its relatively low-priced housing stock, but the principles apply everywhere.