In recent years, Latino and African American consumers with good credit scores of 660* and higher have too often ended up with high interest rate mortgages, mortgages which are supposed to go to risky borrowers. These higher-rate mortgages increased the likelihood of foreclosure among Latinos and blacks. The higher foreclosure rates of these groups help explain why Latinos and blacks have seen such dramatic declines in wealth.
From 2004 to 2008, only 6.2 percent of white borrowers with credit scores of 660 and above ended up with higher-rate mortgages. Latinos and blacks with good credit scores, however, were three times as likely to end up with higher-rate mortgages.
Borrowers of all races suffered from the anything-goes attitude of the housing boom. The Wall Street Journal has reported that more than half of high interest rate loans during the peak years of the boom went to borrowers who should have qualified for prime mortgages. The data also suggests that Latinos and blacks with good credit were especially at risk for ending up with higher-rate mortgages.
Discriminatory housing practices are one reason why our country needs a strong Consumer Financial Protection Bureau. A powerful CFPB helps make sure that everyone is treated equally and fairly by the financial services industry.
*The Fair Isaac Corporation—the company that created the FICO score—classifies scores of 660 and above as “good.”