U.S. to probe alleged mortgage discrimination

The Obama administration on Wednesday said it would investigate charges that almost two dozen lenders have unfairly denied U.S. government-backed mortgages to qualified loan applicants.

The NCRC said the lenders were only providing mortgages to borrowers with credit scores higher than the 580 minimum required by the FHA, a move it said disproportionately affects African-Americans and Latinos.

"By denying access to FHA loans to qualified, credit-worthy individuals, without regard for the actual risk posed to the institution, lenders are discouraging the flow of credit and capital into working-class communities, including minority neighborhoods," David Berenbaum, chief program officer at the nonprofit group, said in a statement.

"These policies amount to discrimination in violation of the federal Fair Housing Act," he said.

The cash-strapped FHA has raised its credit standards to shore up the agency's finances and the new rules require a 580 minimum FICO score for borrowers with downpayments of less than 10 percent. Prior to the increase, which took effect in October, FHA guidelines allowed all borrowers to put down just 3.5 percent, regardless of credit score.

Many lenders are nonetheless requiring scores in the mid-600s, the group said.

Loans backed by the FHA, which does not make loans directly but guarantees them for borrowers who meet certain criteria, are now close to 20 percent of new mortgage originations.