Minorities more likely to be denied mortgage

Even a hot housing market hasn't overcome the factors that make it harder for some to become homeowners.

While the hot housing market and bargain basement interest rates have allowed more people than ever to become homeowners, a new study makes the case that many African-American and Latino families continue to be locked out of the American Dream.

ACORN, a national advocacy group for low- and moderate-income families, is releasing a study today that says African-Americans in the Tampa Bay area were more than twice as likely as whites to be turned down for a home in 2002, while Latinos were rejected 1.77 times more often than whites. Although the number of conventional purchase loans made to African-Americans and Latinos increased by double-digit percentages between 2001 and 2002, the disparity between the two groups has continued to grow significantly over the past five years.

And the study, which analyzed data from more than 7,700 lenders covered by the Home Mortgage Disclosure Act, found the difference doesn't solely reflect differences in wealth among the groups. Upper-middle income Latinos and African-Americans were more likely to be rejected for a loan than low-income whites earning half as much or less a year.

Local housing professionals downplay the likelihood of outright discrimination, saying loan approval has evolved into a fairly cut-and-dried function of a buyer's credit score, without much room for subjective approval.

Roland Wilson, owner of Home Equity Financial Services in Pinellas Park, said bankers sometimes decide the fate of a mortgage application without ever meeting the applicant.

"If you have the credit score, you're going to get the loan, whether you're white, green, black or yellow," Wilson said. "Each lender might have different criteria for what good credit is, but they don't stray from that score system."

Wilson, whose company works with buyers who have been turned down by other lenders, recalls a time when race did commonly come into play.

"Fifteen years ago, there were companies that actually redlined South St. Pete," Wilson said. "I had to turn in a company that refused to handle any loans from the area. It may still go on behind closed doors, but I haven't seen it."

What Wilson has seen is a tendency for some companies to accept only mortgages that total more than $50,000 or $100,000. If houses selling below those thresholds are accepted, the buyers are usually charged a higher interest rate.

"You could have a gorgeous home that only costs $70,000, but the buyer would be penalized because they want to live in an area where the value of the home is not what it would be in other areas," Wilson said. "To me, that's discrimination."

Herb Fisher, owner of Herbert Fisher Realty in Brandon, said many lenders find smaller loans undesirable because they require a lot of work for little return. "The easiest thing for them to do is to just not approve those people," Fisher said.

Fisher said some groups are more likely to have lower credit scores as result of a number of circumstances, including a lack of understanding of all of the things that affect a person's credit.

"Certain groups are more apt to be reported to the credit bureau than others," Fisher said.

Ron Richmond, senior vice president of First Clearwater Mortgage Corp., said a substantial number of people in the bay area get turned down because of their inability to verify their income.

"There are a lot of people here like painters or agricultural workers that work for cash or get paid on the side," said Richmond, whose company specializes in hard-to-place loans. "They may be making more than sufficient money to pay back the loan, but if they can't prove it, they'll need a higher credit score to qualify."

Bryan Ehrlich, president-elect of the Suncoast Mortgage Brokers Association in Tampa, said one of the biggest challenges is educating clients about what it takes to be approved for a loan.

"If you educate a client and provide them with the proper tools, regardless of race, creed, sex, whatever, ultimately, they will qualify for a loan," Ehrlich said. "For minorities in particular, as much information as could be provided is not available to them."

Ehrlich said many lenders are simply not plugged into all the programs that are designed to put people into homes. "I'm sure there is some degree of discrimination, but I like to be optimistic," he said. "I believe most of the disparity is a result of the failure of lenders to take responsibility to educate homebuyers."

ACORN, the Washington, D.C., organization that performed the study, supports changes in the way credit scores are tallied as a means of closing the gap along race lines.

"Reporting should be more flexible and differences in the way that people spend and utilize credit should be recognized," said ACORN national researcher Valerie Coffin. "For instance, someone may be very responsible with money, but they haven't had a car loan or they don't have a credit card. But the bottom line is that there are still problems in the way people are perceived when they walk in to apply for a loan."

- Benita Newton can be reached bnewton@sptimes.com or 727 893-8318.