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Racial divide on risky loans

Minorities are twice as likely to get high-cost loans, a study shows.

By JAMES THORNER, Times Staff Writer
Published September 5, 2007

Black and Hispanic home buyers were twice as likely as whites to have bought their homes with high-cost loans in the Tampa Bay area last year.

And Acorn, a national coalition of neighborhood activist organizations, fears those racial disparities in lending could lead to mass foreclosures among minorities.

To compile the study, released today under the title "Foreclosure Exposure," Acorn culled mortgage data provided to the federal government by the region's top lenders.

High-cost loans, which in 2006 typically meant loans with interest rates higher than 8 percent, varied widely by race and ethnicity.

Close to 53 percent of black borrowers bought their homes with such loans. That compares with 48 percent of Hispanic borrowers and 23 percent of white borrowers. A similar pattern held for home-refinancing loans.

"We have seen a sharp increase in foreclosures in some of the urban and minority communities that most need to build wealth through homeownership," said Maude Hurd, national president of Acorn, which stands for Association of Community Organizations for Reform Now.

"Too many of our neighbors were steered into unaffordable exploding ARMs adjustable-rate mortgages without being given an option for a fixed rate, and are now facing foreclosure, which harms their families and our communities."

The racial disparities stood even when incomes were roughly equalized, leading some at Acorn to raise the specter of discrimination. The group's regional version of a wider national study takes in Pinellas, Pasco, Hillsborough and Hernando counties.

"Some of our members would say it's racist. There's definitely a problem there," said Laura Goodhue, the group's Florida policy director.

High-cost loans, a term sometimes used interchangeably with subprime loans, grew in popularity as borrowers with lower credit scores pushed into the then-hot real estate market.

Goodhue alleged some lenders engaged in predatory practices by artificially inflating people's incomes to squeeze them into homes they probably couldn't afford.

"They told the homeowners they could always refinance," Goodhue said. "But you can't refinance now when your home's worth less than the loan amount."

Acorn is lobbying banks to be more flexible as such loans, many with adjustable rates, start to unravel.

"We need leniency from lenders," Goodhue said.

James Thorner can be reached at (813) 226-3313 or thorner@sptimes.com.

Loans by race

High-cost or subprime home loans in 2006 (typically with interest rates exceeding 8 percent) in the Tampa Bay area, by ethnic group:

Black: 52.8 percent

Hispanic: 48 percent

White: 23 percent

Overall: 29.3 percent

[Last modified September 4, 2007, 23:01:52]