Women Buyers Beware!

WOMEN MORE LIKELY TO RECEIVE SUBPRIME HOME LOANS;
DISPARITY HIGHEST FOR WOMEN WITH HIGHEST INCOMES

Women are more likely to receive subprime home mortgage than men and these higher rates of subprime lending make it harder for households headed by women to build wealth through homeownership. In 2005, about a third of women took out mortgages with interest rates over 7.66 percent (well above the average prime mortgage rate of 5.87 percent) compared to about a quarter of men, according to a new study released today by the Consumer Federation of America.

“The high levels of subprime lending among women compromise their ability to steadily accrue equity by paying off their mortgage – one of the easiest and most effective pathways to building wealth in America,” said Nancy Register, Associate Director of Consumer Federation of America and National Director of America Saves, a social marketing campaign to encourage lower- and moderate-income households to save and build wealth.

The study examined 4.4 million mortgage originations throughout the country where borrowers identified their gender. CFA examined borrower incomes based on the Area Median Income where they lived to analyze comparable borrowers across the country. The CFA analysis found that the subprime disparity between women and men increased for women with higher incomes relative to men with similar earnings. Although women earning below the area median income were 8 percent more likely to receive subprime loans than similarly earning men, women earning more than double the area median income were 50 more likely to receive subprime loans than men with similar earnings.

“Evidence suggests that women have slightly higher credit scores on average than men and similar credit usage patterns, yet the fact that women are more likely to receive more expensive mortgages at all income levels undercuts the lending industries calm assurances that borrowers are priced based on their
creditworthiness,” said Allen Fishbein, Director of Housing and Credit Policy at CFA.

African American and Latino women had the highest incidences of subprime lending – and the gap between women of color and white men increased as incomes rose. African American women earning double the area median income were nearly five times more likely to receive subprime home purchase
mortgages than white men with similar incomes and Latino women earning twice the area median income were about four times more likely to receive subprime purchase mortgages than white men with similar earnings. African American women make up half the African American purchase mortgage borrowers and Latino women make up nearly a third of Latino home purchase mortgage borrowers. “For the African American and Latino communities, women are a key driver in achieving homeownership. The high rates of subprime lending to African American and Latino women – even those earning double the prevailing local income – may make it harder to sustain homeownership in these communities because of the high monthly payments on subprime loans,” said Patrick Woodall, Senior Researcher at CFA.

Read the entire report.


The findings above focus on the difficulty of building equity by paying down the principal balance due to higher interest rates. Compound that phenomenon with less disposable income due to a higher mortgage payment resulting from the higher interest rate! A double, negative whammy!!

Ladies, please do not let this happen to you! Unless you already have a trusted Mortgage Loan Consultant or Advisor, shop for your loan and compare at least three different lenders along with the loan programs, interest rate & terms offered to you. Request a Good Faith Estimate and Truth-in-Lending Disclosure for each program you are considering.

Just today I received a Good Faith Estimate from a client who was solicited from a mortgage company in Northern California. This lender is actually in violation of federal regulations as they provided her a Good Faith Estimate without the accompanying Truth-in-Lending Disclosure. You see, the Good Faith Estimate is an itemization of the costs involved in obtaining your loan, but it is the Truth-in-Lending Disclosure which provides you the Annual Percentage Rate (APR), which better helps you to compare the total costs of loans.

Ask your family, friends and/or co-workers for the names and contact numbers of loan officers with whom they have completed successful loan transaction. Better to have a referral from a respected friend or family member than to use the yellow pages, radio, television commercial or website ads to find a lender.

You are welcome to contact me by phone or email as I will review your scenario with you and advise you of the current programs, rates & terms that are available for your specific situation. You will then feel better prepared and more confident when comparing and communicating with your lenders of choice.