Lawsuit Against Fannie Mae Alleges Discrimination
Published April 04, 2004
Here's a snippet from Bill Maxwell's column in today's St. Petersburg Times:
Collins, one of Rahmaan's attorneys, contends that credit scoring "is the latest proxy used by insurance companies to redline coverage areas and focus on wealthy white customers. Whether you're talking mortgages or insurance, we think the evidence will show credit scoring hurts minorities, single parents, renters, city dwellers, old people who like to pay in cash, people who've never bothered to create a credit history (so-called "thin files') and members of ethnic groups in which families tend to lend money to its own.
"Fannie Mae, therefore, slams the doors in the faces of minority home buyers and perpetuates the discrimination it is supposed to cure. Furthermore, Fannie Mae fails to give prospective homeowners notice of the adverse action Fannie Mae takes against them."
This is a very interesting case that could possibly change how credit scoring is done completely.
I do hope that Fannie Mae isn't actually discriminating against potential borrowers. Everyone should have the opportunity to own their own home. After all, it is a large part of the American Dream, and if Fannie Mae is discriminating, quite frankly, it's not only illegal, but it's also very un-American.
Click here to read Bill Maxwell's column in today's St. Petersburg Times.
- Lawsuit Against Fannie Mae Alleges Discrimination
- Published: April 04, 2004
- Type:
- Section: Culture
- Writer: Mr. Real Estate
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Comments on this articleComments
Despite the legality of profiling
Sorry, meant to say "the illegality of profiling," if thats a word.
David
Add your comment, speak your mind
(Or ping: http://blogcritics.org/mt/tb/14383)
The problem with NOT credit scoring is that one of the restrictions placed on both Fannie and Freddie by their charters is that they are not to take on too much risk in terms of the home loans they purchase from banks and mortgage companies.
This is one of the contradictory arguments that I hear all the time regarding company's like Fannie and Freddie. Critics charge that these companies are "too risky" because of the amount of debt they take on, but, at the same time, they'll turn around and charge them with racist practices because minorities tend to have more problems with their credit and Fannie and Freddie cannot purchase mortgages with too much risk of default.
Here's the interesting little secret regarding this accusation; When scoring a loan Fannie and Freddie do not ask questions related to race or gender! Instead, these companies score loans based entirely on the credit history of those applying for the loan.
So, if your credit history is poor, there is a chance that Fannie and Freddie will indicate that they cannot purchase the loan from the bank or mortgage company if they choose to lend the money. It does not prevent the bank or mortgage company from issuing the loan, it just means they cannot then turn around and sell it into the secondary mortgage market via Fannie or Freddie.
Despite the legality of profiling, do you know who DOES require the collection of information based on race and gender? None other than our federal government.
Shocker!
David