ACORN Attacks Wells Fargo

One of the costs of being in the business of lending on home mortgages is that you are subject to charges of racial discrimination. Several years ago the Association of Consumer Organizations for Reform (ACORN) mounted an attack on banks for "predatory lending" in the residential mortgage market. The American Financial Services Association (AFSA) responded by showing the basic economic fallacies in the report. Now ACORN has returned to the fray with an assault on Wells Fargo's mortgage lending activities. Its presentation is based on the same flaw that marred its earlier studies. Simply put, ACORN argues that, if African-Americans and Hispanics comprise 30 percent of the population in a given area, they should receive 30 percent of the prime home mortgage loans. We quote from ACORN's recent report [www.acorn.org]: "In each of the 28 ACORN metropolitan areas where Wells Fargo reported over 2,000 prime loans, the African-American and Latino shares of the local population were more than twice their share of Wells Fargo's prime loans—with only three exceptions."

Some of the variables that probably account for these differences are credit history, income, family size, and housing preferences. The final sentence of the earlier AFSA report: "To prove racial discrimination, we would need the following information by the race or national origin of all credit applicants: (a) accept/reject rates and (b) the credit scores of accepted and rejected applicants." ACORN is still missing the second piece of the puzzle.