Group Accuses Banks Of Violating Fed Lending Rules
LOS ANGELES (AP) — A national housing and consumer rights group alleged in a series of complaints to the U.S. Department of Housing and Urban Development that Bank of the West, MetLife Bank N.A and other lenders are unjustly denying government-backed loans to borrowers with low credit scores.
The National Community Reinvestment Coalition complaints filed Tuesday allege that the 22 banks nationwide violated fair housing laws by failing to issue Federal Housing Administration-insured loans to borrowers with credit scores above a threshold set by the government.
The FHA requires borrowers to have a credit score of at least 580 to be eligible for the insurance it provides against default, but many FHA lenders require higher scores.
The NCRC claims that those requirements disproportionately harm black and Hispanic communities, since minority borrowers' credit scores fall between the federal threshold of 580 and the higher benchmarks set by the banks.
The policies have "the effect of discriminating against African-Americans, Latinos, and residents of African-American and Latino neighborhoods across the nation," the group wrote in the complaints, which it announced Wednesday.
The complaints seek an injunction forcing banks to change their lending policies, in addition to unspecified monetary damages.
NCRC had borrowers claiming credit scores between 580 and 615 call lenders to apply for mortgages.
Other banks turned down borrowers with scores above 580 but were not named in complaints because they agreed to consider revising their policies or because the NCRC is still looking into their practices, spokesman Jesse Van Tol said.
He said later complaints could be filed against those banks, which he would not identify.
The FHA program insures loans for borrowers who make a 3.5 percent down payment toward their homes, allowing people with lower savings to become homeowners.
Borrowers pay extra fees to take advantage of the program, which has become the primary source of mortgages for first-time home buyers.
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