Trouble in the Refi Industry?

TROUBLE IN THE REFI INDUSTRY?….Via Max, I find that new data indicates that African Americans have a harder time refinancing their homes than whites. Ditto for Hispanics. Ditto again for women.

But is there really discrimination? After all, the lenders claim that they base their refi rates on creditworthiness, and there’s not much they can do if these groups have lower average creditworthiness. There’s probably something to that, but read this entire excerpt:

Lenders say the new information does not provide a complete picture of the loan-making process. They say borrowers who have poor credit, bad records for paying bills on time, or live in troubled neighborhoods with high foreclosure rates and falling home values are riskier customers than people with good credit who live in neighborhoods where real estate values are rising. Lenders have to charge more money to compensate for the higher risk, they say.

Such risk is generally measured by credit scores. In the past, lenders have opposed efforts to add credit scores to the federally required data, saying the obligation would pose an additional regulatory burden and potentially invade the privacy of borrowers.

In other words, if we showed you those credit scores you’d see that we were telling the truth! But, um, we’re not going to show you the credit scores because that would, um, potentially invade the privacy of borrowers.

Providing aggregate credit scores, or even individual credit scores unattached to names, obviously invades no one’s privacy. The fact that lenders are so eager to keep them secret tells you pretty much all you need to know here.

The full report is here. An appendix that tells you how your city ranks is here.

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