- The Washington Times - Wednesday, September 21, 2005

When you get old, what seems like news to others can look like a rerun of something you have seen before. It is like watching an old movie for the fifth or sixth time.

A headline in the New York Times Sept. 14 said: “Blacks hit hardest by costlier mortgages.” Thirteen years ago, virtually the identical story appeared in the Wall Street Journal under the title, “Federal Reserve details pervasive racial gap in mortgage lending.”

Both stories are based on Federal Reserve statistical studies showing blacks and whites have different experiences applying for mortgage loans. And both stories imply racial discrimination is the reason.

The earlier study showed blacks were turned down for mortgage loans more often than whites, and the later story shows blacks resorted to high-priced “subprime” loans more often than whites when financing a home purchase.

Both amount to the same thing: less credit being extended to blacks on the same terms as credit extended to whites.

Both studies also say this is true even when black and white loan applicants have the same income. The first time around, 13 years ago, this seemed a pretty good case for those who blamed the differences on racial discrimination.

However, both research and old age tend to produce skepticism about things that look plausible on the surface. Just scratching the surface a little often causes a plausible case to collapse like a house of cards.

For example, neither study took credit histories into account. People with lower credit ratings tend to get turned down for loans more often than those with higher credit ratings. Or they have to go where loans have higher interest rates. This is not rocket science. It is Economics 1.

Blacks in the earlier study turned out to have poor credit histories more often than whites. But the more recent news story did not even look into that.

Anyone who has ever taken out a mortgage knows lenders not only want to know your current income, they also want to know your net worth. Census data show blacks with the same income as whites average less net worth. That is not rocket science either. Not many blacks have affluent parents or rich uncles from whom they could inherit wealth.

The earlier study showed whites were turned down for mortgage loans more often than Asian-Americans, and the more recent study shows Asian-Americans are less likely than whites to take out high-cost “subprime” loans to buy a house.

Does that mean whites were discriminated against? Or are statistics taken seriously only when they back up some politically correct preconception?

These are what could be called “Aha” statistics. If you start out with a preconception and find numbers that fit it, you say, “Aha.” But when the numbers don’t fit a preconception — when no one believes banks discriminate against whites and in favor of Asian-Americans, there is no “Aha.”

Both this year’s study and the one 13 years ago provoked an outburst of accusations of racism from people in the business of making such accusations. Moreover, where a “problem” is proclaimed in the media, almost invariably a political “solution” will be proposed. Often the solution is worse than the problem.

The older study showed most blacks and most whites who applied for mortgage loans got them: 72 percent of blacks and 89 percent of whites. It is not as if most blacks can’t get loans.

Apparently the gap has narrowed since, for the New York Times reports lenders have developed “high-cost subprime mortgages for people who would have been simply rejected outright in the past on the basis of poor credit or insufficient income.”

Of course, the government can always step in and stop these high-cost loans, which will probably mean people with lower credit ratings can’t buy a home at all.

Thomas Sowell is a nationally syndicated columnist.

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