Subprime lenders targeting blacks, Hispanics, analysts sa

[jp_48504]

Subprime lenders targeting blacks, Hispanics, analysts say



By Jason Szep 2 hours, 27 minutes ago

BOSTON (Reuters) - Barbara Anderson and her husband know racism. Among the first blacks to move into an Ohio neighborhood 25 years ago, she watched in horror as white neighbors burned her garage nearly to the ground.

Fast-forward to 2007 and Anderson talks of a different sort of discrimination: brokers of subprime mortgages who prey on borrowers with weak credit histories like the Andersons, who raised eight children in Cleveland's Slavic Village district.

"These subprime lenders target you to take you through disaster," said Anderson, 59, who filed for bankruptcy after a legal tussle with a subprime lender, a "nightmare" that she said ended four years ago when her home was nearly foreclosed.

"I was fortunate. I went to another bank that decided to give me a chance with a new loan. The day that happened my headache stopped, my blood pressure lowered, my sick stomach went away, and it was because now I could see some daylight."

Across the United States, blacks and Hispanics are more likely to get a high-cost, subprime mortgage when buying a home than whites, a major factor in a wave of foreclosures in poor, often black neighborhoods nationwide as a housing slowdown puts millions of "subprime" borrowers at risk of default.

Even more troubling, real-estate industry analysts say, is an alarming proportion of blacks and Hispanics who received subprime loans by predatory lenders even when their credit picture was good enough to deserve a cheaper loan.

In six major U.S. cities, black borrowers were 3.8 times more likely than whites to receive a higher-cost home loan, and Hispanic borrowers were 3.6 times more likely, according to a study released this month by a group of fair housing agencies.

"Blacks and Latinos have lower incomes and less wealth, less steady employment and lower credit ratings, so a completely neutral and fair credit-rating system would still give a higher percentage of subprime loans to minorities," said Jim Campen, a University of Massachusetts economist who contributed to the study.

"But the problem is exacerbated by a financial system which isn't fair," he said.

In greater Boston, 71 percent of blacks earning above $153,000 in 2005 took out mortgages with high interest rates, compared to just 9.4 percent of whites, while about 70 percent of black and Hispanic borrowers with incomes between $92,000 and $152,000 received high-interest rate home loans, compared to 17 percent for whites, according to his research.

"It's a huge disparity," he said. High-cost mortgages usually have interest rates at least 3 percentage points above conventional mortgages.

PREDATORY LENDERS

Predatory lenders moved aggressively into the subprime mortgage market as a housing price boom between 2000 and 2005 cut the risk of lending to people with damaged credit ratings.

Many focused on minority neighborhoods in slick sales pitches that offered the American dream: home ownership with no money down and little worry about poor credit.

"The predatory lenders reach out to those who don't really know, people with a lack of education," said Cassandra Hedges, a black 37-year-old mother of two fighting to stave off foreclosure of the Ohio home she bought three years ago.

"One of the first things my broker asked me was 'How do you know you are ready to buy a house. Have you done any research?' We said 'No'. At that point I think he realized 'Okay I got some people that don't know what the heck they are doing'."

She and her husband Andre now face a 10.75 percent interest rate on an adjustable-rate mortgage and monthly payments of $1,600 -- more than double the $650 she told her broker she could afford. Foreclosure looms after she missed a payment.

"If you're white they overlook the fact that your credit score is a little too low or you have one extra late payment," said Barbara Rice, a community organizer at the Massachusetts Affordable Housing Alliance, a nonprofit advocacy group.

Rice, who is white, and a colleague who is black took part in an experiment in Massachusetts last year to test the racial bias of mortgage brokers. They both posed as prospective home buyers in a separate meetings with several brokers.

Rice presented a worse credit rating and lower income than her black colleague to brokers but received better treatment.

"I was given more information," she said.

Many traditional banks do not run branches in poor minority neighborhoods, creating a vacuum often filled by predatory lenders and unscrupulous brokers, said Stephen Ross, a University of Connecticut economist who studies lending.

When the property market was strong, those brokers could tell borrowers that rising prices meant they could easily remortgage their properties to keep up with payments. But since the market peaked in 2005, millions are struggling to repay those loans. This year, some 1.5 million homeowners will face foreclosure, research firm RealtyTrac estimates.

The U.S. Mortgage Bankers Association said disparities by race alone in home loans do not prove unlawful discrimination but may indicate a need for closer scrutiny.

http://news.yahoo.com/s/nm/20070320/lf_ ... me_race_dc

[CrocketsGhost]

Pay your bills and don't try to get into more debt that you can repay by placing a higher premium on devaluating toys like flashy cars and big screen TVs than on savings accounts and other low-risk investments. I call it the savings before bling plan. Follow those simple steps and you won't need special financing. Oh, but heaven forbid that personal accountability be brought into the discussion. After all, why take personal responsibility for poor credit when you can make phony charges of racism?

[jp_48504]

I send folks to www.daveramsey.com

[SOSADFORUS]

I send folks to www.daveramsey.com

GREAT LINK!!!

There is no better feeling than being debt free, and knowing when the paycheck comes in it belongs to you!! Besides having water, heat ect.

[jp_48504]

That's my plan. No debt. Then I can just save it for the future. I'd like to buy a house and pay cash for it. The one payment plan would be the best.

[CrocketsGhost]

That's my plan. No debt. Then I can just save it for the future. I'd like to buy a house and pay cash for it. The one payment plan would be the best.

That's the ticket. I pay cash for everything I possibly can pay cash for. Even paying cash for a house you still have the big insurance premiums and property taxes. Why give the bank a few hundred dollars per month in interest?

[jp_48504]

I have read that in the near future, retailers will be charging a fee for those of us who pay cash. It will be their way of punishing us for not being slaves to the MASTER Card.

[CrocketsGhost]

I have read that in the near future, retailers will be charging a fee for those of us who pay cash. It will be their way of punishing us for not being slaves to the MASTER Card.

Well, they'll lose my business. I try to stay away from major retailers anyhow and give as much business as possible to craftsmen and sole proprietors.

[SOSADFORUS]

There really isn't anything I need bad enough that would sway me to pay an extra fee just own it.

The only visa I use is a debit card and I have heard several times they were going to start chargeing us to use it , that will be the day I cut it up, or the day they charge me for taking my money out of the ATM at the bank I deal with.