Report finds loan bias in Lexington

African-American homebuyers in the Lexington area are more than twice as likely to be given high-cost mortgage loans than whites at the same income level, the National Community Reinvestment Coalition says in a new study.

The Lexington metro area ranked 40th in the nation in disparities in lending to low and moderate-income whites and African-Americans, and 56th in lending to middle- and upper-income borrowers of the same races, the coalition said.

The report was released by the Lexington-Fayette Urban County Human Rights Commission, which called for a review of enforcement of fair housing and lending programs.

The commission also urged a review of financial literacy programs to make sure they are available to minorities and others who need them.

"As this study reminds us, our community may not be shielded from the devastating effects of the selling of bad loan products to our most vulnerable individuals who are identified in this study as disproportionately African-American," said William D. Wharton, executive director of the Human Rights Commission.

Mayor Jim Newberry endorsed the recommendations and said "the findings of this report should be unacceptable to all Lexington citizens."

Newberry said "the city has been working to improve financial literacy among people who are considering home ownership, but these numbers indicate that we need to greatly expand our educational efforts."

Chris Evans, president of the Mortgage Bankers Association of Kentucky, said the report could be deceptive because the mortgage industry has been changed by the housing slump and the wave of foreclosures since 2006 when data for the report were gathered. "A lot of the bad apples who were taking advantage of borrowers ... are gone," he said.

Earlier this year, Evans said, the industry supported the passage of House Bill 552, which strengthened requirements for mortgage lenders and also the penalties for violations in Kentucky.

But Evans said "consumers still need to educate themselves and know who they are doing business with."

In the study, the coalition said it examined subprime and near-prime loans, also known as Alt-A loans, made in more than 219 metro areas in 2006. Those loans have higher interest rates and generally go to borrowers with lower incomes or poor credit records.

About 49.8 percent of the mortgages made to low- and middle-income blacks were subprime or near prime, while only 22.2 percent of white borrowers in the same income categories received those loans, the coalition said. Blacks were 2.25 times more likely to get subprime or near prime loans than whites.

Among middle- and upper income borrowers, 38.5 percent of blacks received the high-cost loans, compared with 14.7 percent of white borrowers. In this case, blacks were 2.62 times more likely to get subprime or near prime loans than whites.