Federal Reserve Says Race Played Role In Sub Prime Mortgage Crisis

Washington, D.C. (AHN) - While many large banks and mortgage lenders are firmly tangled in the subprime mortgage mess not many small community banks are because they say they stuck to conservative lending practices instead of making risky low- or no-down payment loans. With a record high 2 percent of homes falling into foreclosure during the last quarter of 2007 - most of them with subprime loans - the Federal Reserve says it turns out that there is a racial factor to the sub prime mortgage crisis.

A recent Federal Reserve Study found that 55 percent of African Americans, compared to 17 percent of whites, were steered to risky subprime mortgages when they were qualified for a traditional mortgage with a lower interest rate.

The nation's largest mortgage lender, Countrywide Financial Corp. and San Francisco-based banking giant Wells Fargo & Co are under investigation in Illinois in a probe that is trying to determine if the companies steered minority borrowers to higher-cost loans.

Countrywide has said that it uses an analysis that has safeguards built in to treat borrowers fairly while Wells Fargo has flatly denied that race is a factor in its lending formula.