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Loan modification: racial profile a factor

Lady Liberty
Lady Liberty
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Lady Justice, the personification of the Roman goddess Justitia, keeps a vigil over the entrances of many court houses in America. For those who may have forgotten, she is often cast as an eyeless or blindfolded low-level Hyperion, signifying the blinding or the elimination of luck (Fates) from the equation when one is seeking justice. While her neutrality may exist in our courts, the lady's reach wanes as she nears the mortgage industry. Inside those halls, some may be peeking askance at race.

As more families across the country seek loan modification into an affordable payment, the last thing a homeowner needs is to think not being a member of the majority as another hoop to squeeze through before being approved.

Since the banking crisis in 2008, many surveys suggest minorities are less likely to make it through the long process of having loans reduced to a payment about 28 percent of their monthly income (higher ratios are allowed in many other programs).

Considering nearly thirteen-million people are out of work, many families who purchased homes with two incomes are now struggling to get by on one salary and an unemployment check, if they are fortunate enough to be getting one. Homeowners whose benefits have run out or never qualified are shaving expenses where they can.

In a country as diverse as the United States, race is still tracked on many documents. The loan application is no exception. On the Fannie Mae version of the Uniform Residential Loan Application (form 1003), one of the last questions to be answered before signing is race.

Even though borrowers have the option of selecting “I do not wish to furnish this information,” in light of what is happening to some unfortunate people, many probably wished they had remained racially invisible. Then again, the question has to be asked whether or not failure to state one’s race raises a red flag in the approval process, considering that initial underwriting is done by computers. Machines are only as blind as the people who programmed them.

In addition to this latest display of let’s say intolerance, any loan officer who has been in the business for any length of time will tell you having your applicant check “White” sometimes will garner approval for a non-white applicant who has been previously turned down. Although I have never had that problem in my company, I have colleagues who could attest to the reality of mortgage bigotry.

Old habits tend to die easier than stereotypes. While there are two camps on the efficacy of racial profiling, when it comes to national security, families struggling to make ends meet certainly pose no threat, except to those committing systemic terrorism on those who checked a box that only reflects what they are in a mirror.

Your opinion to the realities of this problem is encouraged.

Question: Should applicants hide their race when trying to save their homes from foreclosure?