NAACP files massive lawsuit against subprime mortgage lenders

You had to know this was coming. This will turn in to a massive class-action lawsuit. I believe it is a high-visibility one of thousands of such suits to be brought against the mortgage industry over the next several years. Those of us in the industry just have to buckle down and hope that the compliance and operations folks ran a clean ship. How many mortgage company owners are sleeping well at night? Not too many I imagine.

Here are the points from the suit:

• This lawsuit is designed to stop these lenders from engaging in systematic, institutionalized racism in making home mortgage loans.
• In a 2006 study, the Center for Responsible Lending found that when creditworthiness and credit risk were equal, African-Americans were still 31 percent to 34 percent more likely to receive higher rate, more expensive subprime loans than Caucasians.
• The National Community Reinvestment Coalition revealed that lenders on average made high-cost subprime loans to higher-qualified African-Americans 54% of the time, compared to 23% of the time for Caucasians, even when the Caucasian applicants were less qualified.
• These and other studies demonstrate that African-American homeowners are paying higher mortgage interest rates than their Caucasian counterparts.

The Lenders: Ameriquest, Wells Fargo, Fremont, Option One, WMC Mortgage, Countrywide, Long Beach Mortgage, CitiGroup, BNC Mortgage, Accredited Home Lenders, Encore, First Franklin, HSBC, Washington Mutual

Please read this post to learn how to get involved and who to contact for more information. I’ll have more to say on this next week; but it is my brother-in-law’s wedding today and I’m the best man so this is it for me for the day!

Update: Russ Martin at SmartMortgageAdvice.com offers an insightful response to the law suit.  I highly recommend reading it.  In his own words: “As a black mortgage broker, I am going to go on record and say that this lawsuit is bunk…”

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