Mortgage Study Notes Racial Gap

RISMEDIA, September 10, 2007–(MCT)–Poor people, blacks and Hispanics get subprime mortgages at higher rates than wealthier people and whites, according to a social justice group’s examination of lending data in 172 cities.The annual study released Wednesday from the Association of Community Organizations for Reform Now, known as ACORN, found that in the San Antonio, Texas area, more than 28 percent of all home loans had subprime rates.

Black and Hispanic home buyers across all income levels in the San Antonio area were twice as likely as whites to get high-cost home loans, according to the analysis.
The group looked at lending data from the San Antonio metropolitan statistical area, which covers Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina and Wilson counties.

The study’s authors defined “subprime mortgages” as those with interest rates at least 3 points higher than the comparable rate on U.S. Treasury securities. Such mortgages typically are issued to those with weak credit histories. Adjustable-rate mortgages — home loans with low introductory interest rates that reset to higher rates over time — weren’t necessarily included in the analysis.

At higher income levels, the racial and ethnic disparity persisted. Black and Hispanic borrowers earning more than $63,189 were 1.6 times more likely than whites earning that much to get high-cost loans.

In refinance loans, the gap widened. Almost 57 percent of refinance loans made to blacks and 61 percent made to Hispanics were high-cost loans. Fewer than 40 percent of refinance loans made to whites had subprime rates.

People with lower income levels also got more subprime mortgages. The study found that 45 percent of San Antonio-area borrowers earning less than $26,550 a year got subprime mortgages in 2006.

Fewer than 23 percent of San Antonio-area borrowers earning more than $63,189 got subprime mortgages.

Lenders have come under fire recently for issuing too many subprime mortgages to high-risk borrowers during the past few heady years of the housing bubble.

Now subprime mortgage holders are defaulting in higher numbers than in years past. As a result, several lenders have cut back on the number of subprime loans issued after tightening the qualification requirements for mortgagees.

“We have seen a sharp increase in foreclosures in some of the urban and minority communities that most need to build wealth through homeownership,” Maude Hurd, ACORN national president, said in a media release.

ACORN is an advocacy group that looks at housing issues for minorities and lower-income consumers. The group has programs to help people learn about credit and how to negotiate with their creditors.

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