NAACP suit alleges lenders discriminated against blacks

July 12, 2007|Associated Press

LOS ANGELES -- The NAACP sued a dozen mortgage lenders yesterday, claiming the companies discriminated against blacks by steering them into higher interest, subprime loans while giving more favorable loan terms to white borrowers.

The lawsuit, which seeks class-action status, was filed in US District Court in Los Angeles.

It demands a court order barring the lenders from discriminating against blacks and compelling them to comply with fair housing and credit laws.

Among the defendants named in the suit are Ameriquest Mortgage Co., Citigroup Inc., HSBC Finance Corp., and Washington Mutual Inc.

Ameriquest, Citigroup, and HSBC defended their lending practices as fair.

A call to Seattle-based Washington Mutual was not immediately returned.

Subprime loans are often aimed at borrowers considered by lenders to be a higher risk because of spotty credit histories. Borrowers who obtain such loans can end up paying much more interest.

Many people who took out adjustable mortgages or home equity loans at subprime interest rates in recent years have been unable to keep up with increasing payments.

That has contributed to a spike in defaults and foreclosures in recent months, with dozens of mortgage lenders going out of business or filing for bankruptcy protection.

In the lawsuit, the NAACP contends the lenders have engaged in "institutionalized, systematic racism" and that black homeowners who received subprime loans from the lenders in 2004 were 30 percent more likely to get higher interest rates than white borrowers with the same qualifications.