Federal Reserve Reports African Americans High Risk
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May 31, 2013
June 5-6, 2013
Greg K, After spending 10 years as a police officer and 12 years as a loan originator and my whole life as an African American I believe I’m qualified to make the following observation(s). The criminal justice system is skewed in respect to Young African American males are disproportionately incarcerated due to racial profiling, poor legal representation, lack of due process 95% of the convictions are plea bargains encouraged by dis-illusioned overworked public defenders. Statistic African Americans are 12% of the US population yet young African American males are 40% of the prison population. African Americans are disproportionately under and unemployed. Credit scores are more of a reliable measure of debt to income than character, most people with bad credit have more month than money. My experience has been, African American borrowers who qualified for conforming loans were steered into subprime loans with onerous terms that closed fast with high ltvs. Spin correction thats the reverse red lining the Fed is referring to. I once had a conversation with a BNC (remember them ?) AE who mocked me for originating full doc conforming loans with this group when I could ABC with high LTV stated and no doc loans using them (my borrowers had good credit income and assets).
This crap about African Americans \culturally have bad credit and character\ and the lending crisis was caused by defaults by this group. I can prove this is Bulls%$t any doubters email me carlcanfundyou@gmail.com
ABC= Always Be Closing
Nice Glengarry shout out Carl!
I am a white woman from the SOUTH I have been in the mortgage biz for 34 years… AND I CAN SAY THIS IS WORNG… GOVERMENT BETTER LOOK OVER THEIR SHOULDER AND CLEAN UP ON THEIR OWN DOOR STEP BEFORE THEY OPEN THIER BIG MOUTH… THIS IS WRONG
I have been orginator since the late 70′s and still orginating loans.. I am from the South and a very proud woman… I cannot believe that the Feds are racist.. Most of my clients are African American’s… TO ME IT DOES NOT MATTER WHAT COLOR YOUR SKIN IS OR HOW YOUR CREDIT LOOKS… THIS DOES NOT MAKE YOU A BAD PERSON..IT IS WHATS IN YOUR HEART.
I am a white lady and this is not right.. the goverment needs to get their?
together.. and quit pointing fingers..
Critical Thinking Test Question:
1-If you believe credit doesn’t matter, please send $10.00 to me/CFPB/ or Federal Reserve and someone will send you a $2.00 gift certificate for something, someday, maybe.
2-If you think Wells settled for 400 Million to avoid court fees, make it $20.00.
3-If you think the Federal government is bullying lenders for purely political purposes, keep your money.
I worked as a mortgage originator for Wells Fargo before the meltdown & was truely amazed @ how hard they went after minoritys for business. It wasn’t because of their good will! Minoritys have as a whole had less access to information & education as well as families who have bought and sold houses, therefore as a general group they have been more easily put into higher rate loans….without asking a lot of questions. Wells gets sued a lot. I am glad. When I worked there they charged more than anyother bank around!
You are right. Big banks dont care either way because they dont play or pay with their own money.
The Federal Reserve is the cancer of America eating it alive from the inside.
The reverse redlining argument really annoys me. If it doesn’t fit the definition of reverse redlining than why in the world would Wells agree to this settlement? I have heard the argument that it’s cheaper to settle than to fight, but $400 million? The big banks are just wimps. This will encourage more groups to sue. Will Wells look at this as a cost of doing business? Probably. Who will end up paying this cost ultimately? Wells customers and shareholders, just like every other tax and penalty placed on the banks. Corporations don’t pay these fees. Consumers ALWAYS do. The same people who feel like they have this great victory over a \big bank\ will end up paying for it in the end.
And how many loans do you think lenders would make with their own $$? At what percentage rate? How much do you think they would loan? The system worked fine until lenders were forced to make loans via CRA requirements, then corporate greed took over.
There all too many things in this country that no one wants to tell, hear, or say the truth about. Because of political correctness many are afraid to tell the truth, many are afraid to hear the truth. And when they do they are called racists. Until this country gets its head out of the preverbial dark spot, this will only get worse. A very wise man one said \The only thing necessary for the triunph of evil, is for good men to do nothing.\ Political Correctness has caused good men to do nothing.
If the Fed would get completely out of it and let the free market work, it would work just fine! And when I say get out I mean no more mortgage insurance and no more bail outs. Let the bank lend their own money and take their own risk, and they will insist that their underwriters take a look at all of the factors before making a loan. If private mortgage insurers didn’t have the Feds involved, they would use realistic criteria and charge competitive fees. But, they would also require compitent underwriting since their po-po would actually be on the line.
Every time the Feds get involved, the system breaks down and everything gets messed up!
Oh and Ameriquest got hammered for this back in mid 2000s. Heck their TV ads always used just minority families.
Ya just new that this day would come. Wait and see NAR and MBA back some new CRA program that will place this issue in ANOTHER Real Estate tailspin. GOOD BYE recovery. Entitlements for ALL. VOTE! VOTE! VOTE! Nov. 6, 2012.
Wells Fargo sucks the big.one and everyone whos been in the RE/mortgafe business any period of time knows this. Through the govt cronies(Buffett) and lobbyists theyve carved out the biggest share of mortgsge originations with no real competitor. B of A is.gone and Chase isnt originating. Look at crap they pulled with Wells Fargo Financial they funnelled many FANNIE quality people into their finance arm and put them into first mortgages well over 100% ltv. Many were minorities. No more Wells Financial and had to pay out like $200 million for people who got screwed.
$400 million is what prob a day origination revenue from borrowers who got servcing sold to Wells? Them paying fines is.much cheaper than Congress investigating.their lending practices.
More government = Higher cost & less efficiency…and in the case of Real Estate – more bad loans and foreclosures.
Risk-based pricing is a proven process to manage the inherent risks in lending money, and it works…the statistics of a process are the collective results of a study after the fact, they speak for themselves. I am more disappointed in Wells Fargo for rolling over to the judicial system…they should have stood their ground instead of handing over investors money without a challenge. I wonder how many people will leave WFB for their poor management!
All that will do is force Wells Fargo to make up that 400mill by nickle and diming the consumer in other ways. Either way, it has unintended consequences that are not so great for the consumer. I bank with Wells fargo and im sure im going to see some annual fees increase or debit card transaction fees increased real soon. It would be like congress legislating restaurants to cap all thier steak prices at 15.00 per steak. The restaurant will only begin charging more for soda, fish, rice, etc…I love our government!!
Just was alerted yesterday from a WFA rep that free checking at WF is coming to a convoluted end – minimum balances, average balances, and minimum direct deposit requirements for 0 fee accounts. There’s also some sort of fee coming for both online and paper statements. Time to bank locally folks!
So this is one way other than taxes for counties to get the revenue they need to operate – sue, then settle with (don’t dare actually go to trial), the lenders for anything that works.
I love statistics and how they can be used by different people to make different “arguments”, even based on the same study. That being said, I have a hard time penalizing everyone in any group just because the group they are aligned with has worse overall numbers. Demographics may seem visually obvious but how many are “purely” anything these days? I wholeheartedly agree that lending should be risk-based: I would not want to pay the same car insurance as someone who matches my demographics and has regular accidents. Nor would I want my interest rate to be the same as someone with less collateral and worse credit history. The fact is that, political correctness aside, we are what we have done and items like interest rates, insurance and other risk-based factors have a place in society. Is it fair? YES!!! Good behavior should be rewarded and past performance is a predictor. If an individual has no history, larger trends (such as demographics) may be helpful. Is everyone the same? NO, not even within a so-called demographic!!! Correlation is NOT causation. If we would get back to priortizing personal responsibility and holding people accountable for their actions this conversation would evaporate. It is time to stop social engineering and pandering. There is too much devisiveness and too many making excuses.
I don’t think they meant to imply that the Banks are charging higher interest rates to African Americans because they are part of a group with higher risk credit scores. They were charging higher interest rates to peole with higher risk scores and more of them happened to be African American. See the difference?
Dear Rosemary:
Hate to break the news to you but YES..That is exactly what they meant.
If one concludes that “ALL” African Americans present a greater credit risk , then one can posit that Wells Fargo is justified to charge “ALL” African Americans (in a particular zip code) a higher interest rate. Making broad assumptions about a race of people is inherently WRONG. Charging higher rates because of someone’s ethnicity is REPUGNANT. I believe everyone should be measured on the content of their character(Credit score) and not on the color of their skin. (Sound familiar?)
i agree 100% and state as much on the show. ~ Brian Stevens
Statistics aren’t not discriminatory. I’ve known this for years in the business.
Say, WHAT? After 34 years in the RE and mortgage biz, I have to report that the FACT that young black men are 8 TIMES more likely to have been incarcerated is not the only statistic pointing to a higher degree of character problems in the Black Community! Remember the Three C’s of Credit? Capacity, Collateral, and CHARACTER!!! Anyone who has taken loan apps for a few months from the gerneral public knows that blacks have a MUCH harder time qualifying for a loan based on their credit, and Credit = CHARACTER! All government programs pointing at making loans easier for groups based on race have to eliminate or moderate the usual Character requirements. So lets call a Spade a Spade – any program that lessens Character requirements increases Market Risk, which is paid for by higher rates on the rest of the population. So instead of rewarding bad character, why isn’t the gov letting the market take it’s course, and instead working to increase CHARACTER?
Unbelievable. I have had rates vary over the years based on my financial situation at the time. So I guess I can claim reverse redlining because I’m a woman and likely some man got a better deal because, well, he may have had better credit and financial circumstances at the time?
The crazy train is now officially of the tracks.
better credit and financial circumstances =better rates!
when has this been different?
Question – (unrelated to today’s daily) Does anyone out there know of any wholesale lenders offering a true construction loan?
Politics. Good way to buy votes and Wells pays the tab. It is an election year, expect more of the same.
This is a socio-economic issue pointing at the resources and opportunities available for people during the Great Recession, not race.
This problem was identified in a study that took place prior to the current recession so, with all due respect, let’s not discount the findings. Even if what you say were correct, so what? Risk is risk. If you are interested, I will post a stabd-alone comment above.
I have been saying this exact thing for many years. It is a cultural and economic fact that many African American’s have poor credit. I can remember when Countrywide got in trouble for not lending to minorities. I was told by their Account Rep that if I had a minority borrower with poor credit to just send in the loan and it would probably get approved. What happened? I sent a loan in that should not have been approved and it closed without many loan conditions. What happened to the borrower? I discovered 18 months later that the loan was in foreclosure. This occurred during a better time in our economy. I believe it was in 1997. It’s time for the idiotic lawsuits to end.
So John,
Why is it that you sent in that loan? Knowing what you know, that this person didn’t qualify for the loan in the first place, thus really not making him your “customer”, why did you send that loan in in the first place? Why is no one asking why Wells has this policy of targeting African American communities in the first place? How many loan officers still originated loans with Wells Fargo KNOWING that they target these communities, and that they charged higher rates to members of these communities.
While not blaming you, I would hope that you can see that you are complicit in Wells Fargo maintaining policies such as this. In essence, it sends a message to Wells, that ” oh, I have a black guy that doesn’t qualify for crap, so send him to Wells, they’ll close it”. And they will. Then, 18 months later, after the house that he didn’t qualify for in the first place, that you assisted with him getting goes into foreclosure, there is an article talking about discriminatory policies, you then get to state your experience without looking at your role in it.
Idiotic behavior precedes” idiotic lawsuits”. There would be no need to bail out banks if we, as loan officers, didn’t participate in this kind of stupidity in the first place. I have had, white, black, and asian clients that have had bad credit. I always knew when they could qualify for a house. We know when we are putting someone in a situation that they cannot afford to be in, period. We know. If we held people (Clients) accountable UP FRONT, (” Sorry you need to get your FICO score up by 60 points to qualify”), then we would be doing our jobs CORRECTLY. There would be no need to make comments like “It is a cultural and economical fact that African Americans have poor credit” which is completely untrue, and shows disrespect to the African Americans that do go to work, pay thier bills on time and maintain high FICO scores, whether you believe such African Americans exist on not. Broad generalizations assist with keeping these policies as status quo. It should occur to you that there are more white people in this country than there are blacks, making it obvious that there are more white people in foreclosure than blacks….so now who is the high risk group? The proof is there that millions of white people bought homes that they couldn’t afford, got foreclosed on, lost everything, and screwed up their credit. Where is the argument for white people being risky? Clearly, they were guided by the same motivations of greed and consumption. Clearly, the issue is one of humanity, not one confined to one specific race.
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