Indians overcharged on mortgages


WASHINGTON -- American Indian and Alaska Native borrowers were nearly twice
as likely to be overcharged for home purchases last year -- but only half
as likely as were blacks, according to the Federal Reserve Board.

Puzzlingly, though, the amount by which Natives were overcharged seems to
have been roughly the same as other minorities and even whites, federal
data would indicate.

The Fed, analyzing Home Mortgage Disclosure Act data, said 16.9 percent of
American Indians/Alaska Natives got "higher-priced lending" (unadjusted) on
home purchases last year, compared to 9.4 percent of whites but a whopping
38.6 percent of blacks.

When the Fed factored in what it called borrower-related and
borrower-plus-lender-related adjustments, those spreads became a good deal

On refinances, unadjusted higher pricing was found on 19.7 percent of
Indian loans, compared to 10.9 percent for whites. On government and
"other" loans, a much smaller category, it was 34.8 percent for Indians and
30.2 percent for whites.

The Fed reported that those overcharged Native borrowers averaged between 4
and 7.2 percent (unadjusted) on their interest rates more than comparable
Treasury securities (the instruments used to price mortgages). However,
there seemed to be little delineation between those Native borrowers who
were overcharged and those of other races or ethnicities. In one category,
Native borrowers were even overcharged less than white borrowers, which
seems unlikely.

On an individual basis, Countrywide Home Loans -- the nation's largest
mortgage lender to American Indians -- reported to the federal government
that it boosted Native lending by 50 percent last year, possibly due to
multi-racial counting.

The Pasadena, Calif.-based mortgage bank tallied $4.1 billion in mortgages
to American Indians and Alaska Natives during 2004, up half again from the
$2.7 billion it reported in 2003.

The volume was twice as much as that reported by the second-largest lender
to Indians, Wells Fargo Bank, according to 2004 Home Mortgage Disclosure
Act data.

And, with Native Hawaiians and other Pacific Islanders broken out as a
separate category last year (previously they had been lumped in with
"Asians"), Countrywide recorded what would be the first $5 billion year in
Native lending, with $1.8 billion in lending to this group.

As with all government data, however, the HMDA numbers deserve a careful
analysis. In 2003, lenders reported just $14 billion in loans to Natives.
The $24.9 billion they reported this year would be a 70 percent increase in
dollar volume year over year. This seems hard to credit, especially when
the overall mortgage market decreased by a quarter: from $3.9 trillion in
2003 to $2.8 trillion in 2004. Add in $21 billion reported loaned to
Pacific Islanders, and the year becomes even more robust. (There may still
be some multi-racial counting in this group as well.)

However, lending by subprime mortgage lenders nationwide increased last
year, indicating a possible increased penetration of the Indian marketing
by this niche of the mortgage lending business. A look at the top 10
lenders to Indians reveals several subprime mortgage companies and one
finance firm. Since some subprime lenders have been connected to abusive
lending, this is a development not everyone in Indian country would
welcome. But it seems unlikely to be the most important factor in the

The bigger possible factor in the increase is the change of classification
in HMDA race and ethnicity last year, where people could classify
themselves as being of more than one race. When the Census Bureau
instituted the same system in 2000, millions of new mixed-race Natives were

The top 10 lenders to Indians made nearly half -- $11.2 billion -- of that
2004 total of $24.9 billion, according to numbers released by the Federal
Financial Institutions Examination Council, the multi-agency group that
collects HMDA data, and sorted by National Mortgage News.

Second place for Native lending went to Wells Fargo Bank, at $1.3 billion.
However, Wells reports its mortgage volume in multiple units; and its
finance company, Wells Fargo Funding of Minneapolis, also made the top 10
at $454 million. Added together, Wells loaned nearly $1.8 billion to
Indians and Alaska Natives, and another $1.25 billion to Pacific Islanders.

In third place was Bank of America (Charlotte, N.C.) at $1.1 billion;
fourth was Lehamn Brothers Bank (New York) at $988 million.

A pair of Irvine, Calif.-based subprime mortgage lenders came in fourth and
fifth. Argent Mortgage, the nation's largest subprime mortgage lender, was
fourth at $808 million; New Century Mortgage, the No. 2 subprime lender,
made $705 million in loans to American Indians.

Washington Mutual Bank (Seattle), the nation's largest savings association,
was sixth in 2004 at $605 million, while National City Bank of Cleveland
was not far behind WaMu in seventh place, at $588 million. MortgageIT, a
New York-based lender, took ninth place with $563 million.

Of 8,853 institutions that reported HMDA data, less than half, or about
3,700, reported making loans in the Native American category. According to
the Fed, Natives made up a higher percentage of those given manufactured
housing loans (1.2 percent of the national total) than stick-built homes
(.8 percent). Interestingly, this was not the case for Native Hawaiians,
who made up .5 percent of stick-built borrowers but only .3 percent of
trailer loans.