Discrimination Factors In Mortgage Loans Approval? |
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A past statistical equation developed by the Boston Fed revealed that marginal black applicants were 60% more likely
to be rejected for mortgage loans than whites with comparable financial
characteristics. But in reality, old-fashioned discrimination, where clearly qualified black applicants were rejected for mortgage loans and qualified whites were accepted is nowhere to be seen now. However, many people still think that racism is a determining factor in availing mortgage loans. In recent years, the media has published many articles under bold, misleading headlines trumpeting the racism that allegedly pervades America's mortgage lending industry. For example, one highly publicized review of 10 million loan applications found that white applicants were denied mortgage loans 26% of the time while blacks were rejected 50% of the time. Blacks were twice as likely as whites to be rejected for mortgages. Scarcely mentioned, however, was the fact that the study did not account for such factors as each applicant's debt burden, credit history, value of collateral, or size of down payment. Without such information, of course, the findings were practically meaningless. Unlike the report mentioned, a people's amount of outstanding debts and irregularity of payments play a major role in getting mortgage loans. Most companies and lending institutes make tall claim that even if you suffer from bad credit they offer you mortgage loans at very competitive rate. However, your credit standing plays a very major role in getting the loan. If you don't have your own home how could you expect for a mortgage loan? Discrimination does occur, but not the type like the media highlighted. Banks would rather not make mortgage loans of less than, say, $40,000, because processing costs and federal regulations make such small loans money-losers. They prefer mortgage applicants who have already established credit-worthiness by paying off credit cards and other loans. A stable job history is preferred to a history of part-time positions. None of these sound business practices has anything to do with race. Those who charge that racism guides the practices of money lenders consistently ignore one grave reality: banks are in business solely for the purpose of making profitable loans that have a good likelihood of being repaid. In today's competitive marketplace, few salesmen in any industry would foolishly pass up profitable transactions simply to indulge their own bigotry. Why should we assume that the mortgage loans lending business is uniquely peopled by racists? To be true, there is hardly any bank or financial institution that considers the race and religion of a people before sanctioning mortgage loans. If you have your own home or other collateral to put as a guarantee against the loan, you're most welcome. But things do not just end there. In fact, it's the real beginning to your dream of getting rid of your financial obligations. Apply for mortgage loans only when you're confident enough of making the repayments on time. Census data show that whites and blacks, as groups, have similar overall default rates on home mortgage loans. If banks were discriminating against blacks by holding them to stricter standards than whites, white borrowers would have a lower default rate than blacks. The fact that the default rates of whites and blacks are so similar is strong evidence that lenders are applying race-neutral standards in awarding mortgage loans. To conclude, it can be said that racism is totally not a factor in mortgages. In fact, the reason why a lot of blacks are being rejected is because they have less collateral. Collateral play a vital role in availing mortgage loans; without collateral, you'll never get a loan. So, what do you think? If you are planning to apply for a mortgage loan, think about your collateral that you can put against the loan. Do not believe in rumors like racism can dampen your chances of getting mortgage loan. Instead, contact your lenders and get quotes as early as possible. |
