Rochester Business Journal

Some 86 percent of mortgages in Rochester’s minority communities in 2010 were backed by government entities at higher interest rates, the highest percentage among seven cities included in a report released Thursday.

The report, Paying More for the American Dream VI: Racial Disparities in FHA/VA Lending, was compiled by seven community organizations, including the Empire Justice Center in Rochester.

It shows evidence of a two-tiered mortgage market characterized by high rates of government-backed loans made to borrowers in minority communities and to minority borrowers, officials said.

More than 75 percent of home-purchase loans made to black and Latino borrowers in the Rochester area were insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, the report states.

Homeowners in Rochester’s minority communities obtained government-backed refinanced loans more than twice as often as homeowners in predominantly white neighborhoods, the report states. Black homeowners here received refinanced mortgages 2.7 times more than white homeowners.

Black and Latino borrowers in the seven cities accounted for 67 percent of FHS or VA loans, the report states. Borrowers who bought homes in minority neighborhoods received government-backed loans twice as often as borrowers in predominantly white neighborhoods.

Homeowners in minority communities received government-backed refinanced loans more than three times as often as those in predominantly white communities, it states.

“These disparities are very troubling,” said, Barbara van Kerkhove, Empire Justice Center researcher and political analyst, in a statement.

“Some people who were eligible for a more affordable conventional loan may have been steered into an FHA loan based on their race or where they live.”

Boston, Charlotte, Chicago, Cleveland, Los Angeles and New York City also were in the study.

The sixth edition of the report underscores the need for policy changes to correct systemic inequalities in housing finance, its authors said. They include making fair lending a top priority at all levels of government, regulatory assurance of fair access to affordable mortgages, keeping foreclosed properties in good repair, and expanding and reinforcing the Community Reinvestment Act.

The report is a collaboration of the Empire Justice Center, the Woodstock Institute, the Neighborhood Economic Development  Advocacy Project, Reinvestment Partners, the California Reinvestment Coalition, the Massachusetts Affordable Housing Alliance and the Ohio Fair Lending Coalition.

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