Lenders Defend Subprime Practices

Ameriquest, Citigroup, HSBC, Washington Mutual and others made high-cost subprime loans to African-American borrowers in numbers that far exceed those given to Caucasian borrowers, the civil rights group charged in court papers.

“The lending industry has a long history of engaging in racial discrimination in connection with mortgage loans made to African-Americans, with products and terms that are drastically worse than those given their Caucasian counterparts,” the organization wrote in the 17-page complaint filed in U.S. District Court for the Central District of California.

The NAACP cited several studies to support its allegations. For example, the NAACP claims that in Boston in 2005, 73 percent of high-income African-Americans — those making $92,000 to $152,000 — received subprime loans compared with 17 percent of Caucasian borrowers.

“These statistical disparities are not mere happenstance, but instead result from a systematic and predatory targeting,” the organization claimed. “In fact, upper-income African-American homeowners are more likely to receive a subprime loan while refinancing even when compared to lower-income Caucasian homeowners,” the NAACP concluded.

Steering African-American borrowers into pricey subprime loans violates the Federal Housing Act, the Equal Credit Opportunity Act and the Civil Rights Act, the civil rights group said.

The NAACP has asked the court to bar the lenders from the alleged discriminatory practices and to order them to comply with all federal laws in the future.

In statements e-mailed to MortgageDaily.com, Washington Mutual, HSBC and Countrywide denied the allegations.

Olivia Riley, a Washington Mutual spokeswoman, said, “As a matter of practice, we don’t comment on the specific details of pending litigation. However, we stand strongly behind our business practices and maintain a very strong, comprehensive fair lending program that actively assesses and monitors our lending. WaMu is committed to responsibly addressing the credit needs of all of the communities we serve.”

Riley said WaMu was the first lender in the nation to create “specific responsible lending principles to guide our mortgage activity and to promote fair and ethical lending.”

She also said fairly-priced subprime loans provide a valuable source of credit for those who would not otherwise have qualified for residential loans using traditional guidelines.

Diane Soucy Bergan, an HSBC spokeswoman said, “We do not comment on litigation. However, at HSBC, we take our fair lending and consumer protection practices very seriously, and we are confident that we are treating our customers fairly and with integrity.”

Although not named in the California lawsuit, Countrywide Financial Corp. is facing similar allegations in federal court in Massachusetts. Four African-American homeowners claim Countrywide charged them excessive fees and interest rates because of their race. That lawsuit also claims violations of the Fair Housing Act and the Equal Credit Opportunity Act.

Countrywide spokeswoman, Jumana Bauwens, said the lender has not yet been able to review the Massachusetts lawsuit.

But “no other mortgage lender has done more to lower the barriers to homeownership among historically underserved communities than Countrywide, and we do not tolerate discrimination in any of our lending practices,” she said.

Neither Ameriquest nor Citigroup responded to requests for a statement.