The U.S. Department of Housing and Urban Development said it will investigate complaints against 22 lenders accused of having credit score policies that unfairly denied government-insured loans to blacks and Latinos.
In complaints filed during an ongoing investigation, the National Community Reinvestment Coalition said minimum scores of up to 640 were being required by a majority of the 50 biggest lenders making loans insured by the Federal Housing Administration.
The FHA covers borrowers with a minimum score of 500 if they can put 10 percent down, while those with a minimum score of 580 can put down 3.5 percent. For borrowers with not-so-stellar credit records, FHA loans are practically the only option in today's tight credit times.
"These across-the-board restrictions have no legitimate business defense, since these loans are 100 percent guaranteed against losses except in cases where the lender fraudulently or improperly originated the loan," according to a 25-page report from the coalition, an association of 600 community organizations catering to the underserved.
The group said it asked lenders to change their policies and made complaints against only those that refused to do so. None appear to be on Long Island.
"For lenders to deny responsible home seekers this source of credit, without regard for their capacity to repay the loans, would raise serious fair housing concerns and, if proven, undermine our nation's recovery efforts," said John Trasviña, HUD assistant secretary for Fair Housing and Equal Opportunity.