A new unit of the Justice Department is investigating the lending practices of banks and mortgage brokers suspected of discriminating against minority borrowers.
The new Fair Lending unit is going after lenders and brokers that have unfairly denied minorities access to home loans. It's also looking to identify companies that targeted minorities for mortgages with loose underwriting standards or high interest rates that forced them into foreclosure, said Thomas Perez, the Justice Department's assistant attorney general for civil rights.
Penalties could include civil action or criminal charges. Perez said the unit is working with other federal bodies, including the Treasury Department, in its investigation.
"We are casting a wide net and our goal is to root out every form of discrimination in every phase of the homeownership process," Perez told The Associated Press in a telephone interview.
The campaign is the Obama administration's latest effort to address the foreclosure crisis, which includes a $75 billion plan to help refinance or restructure mortgages for up to 9 million homeowners. Slowing down foreclosures is an important step for the recovery of the real estate market and the economy.
The Fair Lending unit already has 38 investigations pending, Perez said Thursday in a speech at the Wall Street Project Economic Summit in New York, sponsored by the National Urban League and the Rainbow Push Coalition.
The unit not only is looking at past lending practices, but also discrimination that could be occurring as minorities try to refinance or modify mortgages.
Federal regulators provided little oversight for national lenders during the housing boom, contributing to discrimination and fraud, Perez said.
In Maryland, for example, 18 percent of white homeowners had subprime loans, while 54 percent of blacks and 47 of percent of Hispanics had subprime loans, according to Perez, the state's former labor secretary.
A record 2.8 million households received a foreclosure notice last year, and between 3 and 3.5 million homes are expected to enter some phase of foreclosure this year, RealtyTrac Inc. reported Thursday.
SOURCE: The Associated Press (c) 2010