Refinancing Bias: Does Race Play a Role?


Looking to get a mortgage to refinance your home at a low rate? Better check not only your bank account and credit score but your neighborhood's racial profile.

According to a new report that surveyed loans in seven major cities across the country: among the big four bank holding companies that now dominate the mortgage market -- Chase, Bank of America, Citigroup, and Wells Fargo -- the number of prime refinances jumped by nearly one-third in predominantly white neighborhoods in seven cities between 2006 and 2008, while they declined by the same amount in neighborhoods where most residents are members of minority groups.

Overall, for both purchase and refinance mortgages, prime lending plummeted by 60 percent in minority neighborhoods, compared with just 28 percent in areas where most borrowers are white.

The report from seven research and advocacy groups analyzes Home Mortgage Disclosure Act data for Boston, New York City, Charlotte, Chicago, Cleveland, Los Angeles, and Rochester, looking at loans that cost no more than 3 percent higher than the Treasury rate.

The new numbers suggest that the benefits of those expensive interventions are going to some neighborhoods much more than others – with race as a dividing line. Has racial profiling poisoned the mortgage application process?