Survey Details Problems Of Minorities and Credit

Survey Details Problems Of Minorities and Credit
By STEVEN A. HOLMES
Published: *September* 22, 1999

WASHINGTON, Sept. 21— Even in the current flush economic times, with
home ownership rates reaching record highs, a disproportionately large
number of minorities, chiefly blacks, have poor credit ratings,
according to a study released today.

The report, issued by Freddie Mac, indicated that 36 percent of black
adults aged 20 to 40, and 51 percent of Hispanic consumers have good
credit histories, compared with 61 percent of whites. In addition, the
report noted that 48 percent of blacks and 34 percent of Hispanic
consumers have poor credit records, compared with only 27 percent of whites.

The study, which consisted of a survey of 12,000 consumers with
household incomes of less than $75,000, a group for whom securing and
maintaining credit is most critical, indicated that the disparity in
credit ratings persisted across all income spectrums. Black and Hispanic
consumers tend to have worse credit ratings than their white
counterparts, whether they live in households earning less than $25,000
or in homes with earnings between $65,000 and $75,000.

The survey defined consumers with ”bad” credit records as those who
have been either 90 days late on a bill payment in the last two years;
have been 30 days late on a payment more than once during the last two
years; have a record of delinquent liens, or have filed for bankruptcy.

The study is *part of an initiative by Freddie Mac* to help develop
strategies *to increase the number of minorities* who own their own
homes. Though home ownership rates are at record levels, racial
disparities remain firmly in place. Currently 72 percent of white adults
own their own residence, compared with 46 percent of blacks.

Lenders like Freddie Mac and Fannie Mae, both of which deal in the
secondary market, have been saying that *the market for white*
homeowners is becoming saturated and that *for continued growth* to
occur, *banks and savings and loans* must figure out *how to* *increase*
*lending to minorities*, many of whom often have poorer credit histories.

”Increasing the pool of qualified minority home buyers will play an
important role in future expansion of the home mortgage industry,” said
Leland C. Brendsel, chairman and chief executive of Freddie Mac. ”This
initiative is not only good for our nation, but makes good business sense.”

Over the last few years, Freddie Mac’s sibling, *Fannie Mae* , has moved
*aggressively to persuade lenders* to *increase* the number of mortgages
that are extended to *minorities* , underwriting $6 *billion* in loans
*using experimental* means to assess *risk* during the last five years,
according to Ann Logan, Fannie Mae’s executive vice president for
single-family business.

To date, Freddie Mac has been slower in moving to help lenders raise
their mortgage activity among minorities. Today’s release of its study
and its announcement that it will grant $2 million to six historically
black colleges to develop programs to teach black consumers the
importance of maintaining a good credit rating indicate that Freddie Mac
is beginning to move more assertively into this area.

While the study points out the stark differences in credit ratings
between whites and the black and Hispanic consumers, it is less clear
why the disparity exists. For example, all groups studied say they have
been unable to adhere to a relatively simple set of financial behaviors
such as controlling spending, planning for the future and saving money.

The study did find disparities between whites and blacks and Hispanic
consumers when it came to such events as a significant involuntary drop
in income, a large medical expense, a big tax or legal problem or an
extended period of unemployment that could cause someone to fall behind
on bill payments.

But with the exception of unemployment, the disparities were not large.
For example, 30 percent of blacks surveyed reported an involuntary
reduction in income during the last two years. But so did 24 percent of
Hispanic respondents and 20 percent of the whites.