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Predatory Lending and the Black Home Owner |
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Thursday, 09 August 2007 |
By. Kevin Martin
 Kevin Martin
Before we go any further, let me say that my observations
and suggestions come from actual real-world experience. I have had good credit and bad credit. I have benefited from home appreciation and
have had a lender foreclose on me. I
have had many highs and even more lows.
Through it all, I and my wife have been able to buy and sell 6 homes in
the past 20 years.
Let's start with some basic information that is important
for everyone.
1. You Don't Have to Get a Home Loan (Right Now)
So many of these articles drive me crazy because they make
Black people look like helpless victims of circumstance. We are not helpless! Always remember you don't have to do ANYTHING
right now. An old saying is, "Nothing is
sometimes a smart thing to say and an even smarter thing to do."
Just because someone calls you and is aggressive on the
phone does not mean you have to get a home loan from them. This is a business decision and you don't owe
anyone anything, no matter how nice they are or how much you like them.
Also, remember that people who have poor credit scores or
who make a lower down payment are going to pay more for a home loan. Many Blacks do suffer from poor credit scores
or a lack of funds for a down payment.
However, this does not mean that you HAVE to get a subprime mortgage
loan. You can wait until you can improve
your credit rating. You can also wait
until you can save money for a larger down payment. It is better to wait a few years than to make
a bad decision now that will affect you negatively in the future. Also, setting a goal, and working towards
that goal is a good character building experience and worked well for our
parents and grandparents.
2. Make Lenders Compete For Your Business
Due to the long-term efforts of the Civil Rights movement,
we can now make lenders compete for our business. There are many banks, credit unions and other
lenders who make home loans and they all want your business. Whether it is Bank of America, Washington
Mutual, Wachovia, ABN Amro, Countrywide or your local credit union, we now have
many options for getting loans. We no
longer have to get a loan from anyone.
Also, if you have poor credit (see rule 1) or feel that you are not
knowledgeable about home loans, you can start building relationships with these
lenders NOW with an eye to getting a loan in the future.
3. Do Your Homework
Many studies over the years have stated that Blacks receive
home loans with higher interest rates than Whites with comparable income levels
and credit ratings. See http://www.azcentral.com/home/hb101/articles/0531homeloans0531l.htm and http://responsiblelending.org/pdfs/rr011-Unfair_Lending-0506.pdf
If this is the case, it means that is incumbent on you as
the home owner to do your homework before getting any type of home loan. Filing lawsuits after the fact does not help
you if you have already received a bad loan, or if you have lost your home due
to excessive fees and/or high monthly payments!
However, if you have good credit and a good income but still
accept a mortgage that is "higher" than industry standards, the ultimate
responsibility for this mistake rests with you.
Home loans typically take a long time to pay off, from 20-30+
years. A difference of 1-2% interest
will make a difference of ten of thousands of dollars over the life of your
loan and you, not anyone else, will end up paying that difference.
A home loan is typically the largest purchase most of us
will make in our lifetimes. For a
purchase this large we cannot afford to trust someone else. We cannot afford to not do research. The information is no longer "hidden" or
"unknown". Most importantly, the stakes
for our community are too high to not be educated. The wealth and lifestyle impacts of
homeownership are huge and critical.
In my next few articles I am going to provide the "Ten
Commandments" for getting a home loan. I
am also going to try and provide 3-5 more commandments for refinancing and/or
equity loans.
Kevin Martin is a black entrepreneur in Los
Angeles who grew up in Riverside
and who is interested in discussing specific actions for improving the black community. Comments can be sent to "
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
". This account receives a great deal of spam
so be sure to include this article's title or blackvoicenews in your subject
line.
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