The U.S. Department of Housing and Urban Development announced yesterday that it is launching multiple investigations into the practices of certain mortgage lenders to determine if their home loan policies illegally deny qualified Black and Latino borrowers access to credit.

Photo by Heide Benser

The investigations are in response to 22 complaints the National Community Reinvestment Coalition (NCRC) filed with HUD alleging that the loan activities of the mortgage originators showed that their home lending practices deny FHA- insured loans to Blacks and Latinos with credit scores as high as 640. Federal Housing Administration (FHA) guidelines allow mortgages to borrowers with credit scores above 580, provided the borrowers have down payments equaling 3.5 percent of the loan amount, or above 500, provided the borrowers have down payments equaling 10 percent of the loan amount.

“FHA is an important vehicle for Americans who want to purchase or refinance a home. We thank NCRC for bringing these complaints to HUD. For lenders to deny responsible home seekers this source of credit, without regard for their capacity to repay the loans, would raise serious fair housing concerns and, if proven, undermine our nation’s recovery efforts,” says HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña. “HUD will take appropriate action against any lender found to be engaging in discriminatory practices.”

Prior to the recent downturn in the economy, FHA-insured mortgages comprised less than three percent of new home loans. Since the economic crisis, FHA and the Government-Sponsored Enterprises have insured or guaranteed nearly 95 percent of new mortgage loans being originated. By the end of 2008, almost half of new home purchase loans and one quarter of new refinance loans were FHA or Veterans Administration (VA) insured.

According to NCRC, an association of more than 600 community-based organizations that promote access to basic banking services, their fair lending “testers” evaluated the practices of national lenders, financial services corporations, and other regional and local FHA-approved lenders. In the complaints filed on December 7, NCRC states that lenders were chosen according to their market share and volume of FHA loans, as well as through discussions with community leaders.

Under the Fair Housing Act, HUD impartially investigates allegations of housing discrimination and, during every phase of investigations, attempts to settle complaints through conciliation efforts.

FHA was created in 1934 and currently insures more than 6.5 million single family loans. 80 percent of loans insured by FHA in 2010 were to first-time homebuyers and more than 30 percent of home purchase loans were to minority homebuyers.

FHEO and its partners in the Fair Housing Assistance Program investigate more than 10,000 housing discrimination complaints annually. People who believe they are the victims of housing discrimination should contact HUD at 1-800-669-9777 (voice), 800-927-9275 (TTY).