On February 8, the California section of Real Estate Rama posted an article entitled “New Research Shows Red-lining in Five California Cities”.  According to the article, predatory lending is hitting cities in California that have a high Latino or African American population.  The article, which cites a report by the California Reinvestment Coalition, asserts that many banks have failed to prevent foreclosures and that there is a high denial rate for home loans amongst the Latino and African American populations.

The report produced by the California Reinvestment Coalition examined the practices of banks, including large mortgage financiers, in five California cities over the past three years.  The cities surveyed were:  Los Angeles, Oakland, Sacramento, San Diego and Stockton. 

After the study concluded, the California Reinvestment Coalition discovered that there were a high amount of predatory home loans and defaults, specifically within the Latino and African American communities.  The study also revealed that the amount of loan modifications and new prime loans were very low compared to other ethnicities and neighborhoods.

The report from the California Reinvestment Coalition brings to light four main points.  First, mortgage lenders in California have saturated communities with high-cost predatory loans.  Second, a large number of foreclosures have resulted from predatory lending practices.  Third, the majority of mortgage lenders are not working with families to prevent foreclosures.  Finally, mortgage lenders are denying home loans and loan modifications to a high number of applicants in the Latino and African American communities.

Kevin Stein, associate director of the California Reinvestment Coalition, said, “The data confirm what we have heard from housing counselors and borrowers—that banks aren’t meeting their commitments to help families stay in their homes, and that this is further destabilizing California communities.”

At American Economic Solutions, we feel these are bad banking practices that must be stopped immediately.  With the number of foreclosures already being so high and California’s staggering unemployment rate, we find it disconcerting that banks are choosing to deny select communities credit. For too long, mortgage lenders have been taking advantage of homeowners’ lack of knowledge. A lot of these mortgages were issued while homeowners were under duress and looking for options. 

The reality is, the government has been taking care of the banks, but banks are not taking care of homeowners. Lenders received billions, if not trillions, in assistance from the government.  Historically, lenders have been very conservative, but they very liberally took the government’s money.  Instead of passing the savings and money onto homeowners who need it the most, they pocketed it, leaving countless people homeless and economically devastated.

Read full story from Real Estate Rama – California….