Predatory lending in violation of federal discrimination and consumer protection laws is a large component of the mortgage mess that has brought our national economy to a standstill. Enforcement of of federal discrimination and consumer protection laws is one means to force the predatory loan sharks to pay their share of remedying the mess suggests law professor Ray Brescia in an interesting article, Eat the Loan Sharks?, on Slate. He reports that Federal Reserve data from 2006 shows that, among borrowers of similar income, 30 % of African-Americans received subprime loans, 26 % of Latinos did compared with only 18% of white borrowers, facts that suggest discriminatory lending practices in violation of federal law. Professor Brescia explains further:
This discrimination is at the core of a number of lawsuits advocates have filed across the country over the last year. Several of the cases focus on a particularly devious practice: Without borrower knowledge, many mortgage brokers received a commission from the lender for persuading a borrower to accept a higher loan interest rate than what the bank was otherwise willing to offer. The lawsuits claim that such commissions were paid more often in loans to African-Americans and Latinos than in loans to whites, revealing, again, that lenders often charged borrowers of color more than their white counterparts. As these suits progress, and the groups suing gain access to lenders' and brokers' records—e-mails, internal memoranda, training materials, and other documents—we are likely to learn more about the practices of the lenders who are the defendants and about the industry in general.
Professor Brescia also notes that consumer protection laws in many states also prohibit the common practice of mortgage brokers increasing their own commissions by steering borrowers into more expensive mortgages.
Robert L. Abell