Fight back! One couple denied a mortgage refinancing loan refused to be rejected. Here's how advice in B.E. helped them fight back and win - includes tips for consumer action against mortgage discrimination - Cover Story

Black Enterprise, July, 1997 by Majorie Whigham-Desir

WHEN IT COMES TO MONEY, THERE'S ONLY one color that should matter: green. Most African Americans and Hispanics, however, know other shades can come into play when it comes to home finance. Just ask Ricardo and Janet Bermudez.

Back in 1993 when mortgage interest rates dipped below 7%, the Babylon, New York, couple saw the perfect opportunity to consolidate both their 15-year, 8.75% mortgage and 10.75% home improvement loan by borrowing enough to cover both obligations at a low 6.75% rate. "Even with refinancing costs, we were going to save a lot of money, says Ricardo.

They filed for a home refinance loan with the Long Island Savings Bank (LISB), which had sold the Bermudezes their foreclosed "handyman special" and provided them the original $46,000 mortgage just two years earlier. To Ricardo and Janet, a new loan looked like a sure bet.

Still, there should have been reason to worry a little. In October 1991, even before closing on their house, a LISB loan officer had told them they could get a home improvement loan to cover the cost of repairs. All the same, the bank turned down their application for $10,000 one month later. Four months later, a white contracting firm obtained a preapproved $16,000 home improvement loan for them from LISB. The couple went back to the bank, confronted the branch manager and got LISB to grant their original $10,000 request.

The Bermudezes figured that the scuffle was the end of any trouble they'd have with LISB. "We didn't think they'd pull the same stunt again," says Ricardo whose checking and savings accounts were also on deposit with the bank.

Shortly after they were turned down, Ricardo retold his Story to a friend who had received a copy of the July 1993 issue of BLACK ENTERPRISE. Coincidentally, the cover story that month v. as "How To Fight Mortgage Discrimination and Win!" The article confirmed what Ricardo and Janet had suspected but didn't know how to prove: they were victims of mortgage discrimination. The information in BE was very crucial to our case--it was at the right time and on the money," Ricardo smiles.

The Bermudezes are not alone. Despite new state and federal lending programs, mortgage discrimination is still a problem blocking minorities from vital credit sources. According to the Home Mortgage Disclosure Act (HMDA), blacks were denied conventional home mortgages about twice as often as whites--40.5% vs. 20.6%--in 1995. This is up from 37.6% in 1991, and roughly the same ratio for even government-backed FHA and VA loans (15.3% vs.8.5%) as recently as 1995. The same goes for home improvement and refinancing loans: blacks and Hispanics still get refused twice as often as whites. Even high-income blacks are turned down for home refinancing twice as often as whites--22.9% vs. 10.8%.

Critics argue that discrepancies continue to exist because there are more people applying for loans, some of whom may be credit unworthy. For example, when the Bermudezes applied for a loan in 1993, they were among 160,344 blacks and 197,942 Hispanics to do so. Of that number, 43,293 black applicants (and 54,903 Hispanics) were denied. Of the 5,010,157 that applied, 514,864 white applicants were denied. Ricardo is black and of Panamanian descent, while Janet is African American and a native of South Carolina.

The Bermudezes were encouraged by the couples in the BE story who'd faced mortgage discrimination and won. Through a local fair housing organization, the couple filed a discrimination complaint with the Department of Housing and Urban Development (HUD) against LISB.

Three years and reams of paper later, the couple won, settling with LISB for the 15year, $78,750 loan at the 6.75% they initially sought--plus another $23,000 in damages. The bank denies any wrongdoing and says it settled to save on litigation costs. "We don't feel that we discriminated against them and that the case had any merit," says LISB vice president and general counsel Karen Cullen.

Outside of securing a loan, Janet and Ricardo say they weren't in it for the money. Instead, says Ricardo, "We wanted to do this so that when another black person goes to the bank, they won't have to go through what we did."

Other banks operating on Long Island have also had their problems. In the largest such case filed by the U.S. Justice Department, a mortgage unit of Fleet Bank was forced to refund $3.8 million to 600 minority customers whom it charged higher interest rates and fees than white customers.

Not every rejected or delayed mortgage is due to discrimination, however. If you have insufficient income for the home you want, poor credit or too many outstanding debts, you may not qualify for a mortgage. By law, your lender must tell you in writing within 20 days of denial why you were rejected.

But, if you can show that you were wrongly turned down, then seeking arbitration may be a recourse. The procedure the Bermudezes followed, though tedious and time-consuming, is one anyone can adapt, provided they are willing to commit the necessary energy. There are also resources and organizations that can help. Here's what you'll need to know to confront mortgage discrimination.