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Mortgage Rates for Women

CFA study says women pay more

December 19, 2006


photo of Patrick Crowley
A new study suggests a glass floor is keeping women from obtaining the lowest mortgage rates -- though the disparity disappears for women earning less than the median income. But the study ignored other loan approval factors, according to a mortgage banking group.

Even when women have better credit scores and make more money then men, they often pay more for a mortgage, according to the study by Washington-based Consumer Federation of America.

In 2005 about a third of women took out subprime mortgages compared to about 25 percent for men, according to the report which looked at 4.4 mortgage originations where borrowers identified their gender.

"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," Nancy Register, the federation's associate director, said in a statement.

The study also found that women are "significantly over-represented" in the subprime mortgage pool. While women make up 30 percent of mortgage borrowers, they make up 39 percent of subprime borrowers.

The disparity persists even when women making high incomes are tossed into the subprime pool, the group reported. Women earning double the median income are 47 percent more likely to receive a subprime loan that men with similar incomes.

"In contrast," the federation said in the statement, "women earning below the area median income are 3.3 percent more likely to receive subprime mortgages."

Allen Fishbein, the association's director of housing and credit policy, said in the statement that the study's findings "undercuts the lending industries calm assurances that borrowers are priced based on their creditworthiness."

But Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said while the study takes in borrowers' income levels it ignores other factors that play into mortgage lending.

"It does not include many factors that determine someone's loan and what the rate should be," Hobbs said in an interview with MortgageDaily.com. "Net credit scores, debt to income ratios and other factors are vital.

"Without seeing that information is it really irresponsible to come to any sort of definite conclusion about why there are disparities in lending numbers," he said. "It shows there is a disparity but not why there is a disparity."

The federation says in the report that women are receiving subprime loans even though they have, on the average, higher credit scores than men. The report refers to a study by Experian, a consumer credit reporting firm, showing the national average credit score for men is 675 compared to 682 for women.

The study also found that African-American women and Latino women are the most likely to receive a subprime loan; white men are the least likely.

"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," Patrick Woodall, a senior federal researcher, said in the statement.

Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: [email protected]

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