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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Mick Mørmøny who wrote (40329)	9/3/2005 3:28:06 PM
From: Mick Mørmøny	Read Replies (1) \| Respond to of 306849

Newspaper study finds high mortgage rates four times as likely for blacks By: Associated Press CHARLOTTE, N.C. -- Blacks who bought homes across America last year were four times as likely as whites to get mortgage loans at high interest rates instead of lower market rates, a study conducted by The Charlotte Observer found. The paper analyzed records from 25 of the nation's largest lenders and found that even blacks with incomes above $100,000 a year were charged the high rates more often than whites with incomes below $40,000. For decades, blacks struggled to get loans at any price. Lenders ignored entire black neighborhoods, a practice called redlining. Last year, the nation's 10 largest banks denied black applicants twice as often as whites, according to the report. Many of those who don't qualify for a market-rate loan turn to "subprime" lenders, companies such as Ameriquest and New Century that charge higher interest rates than banks. Lenders, including Ameriquest and New Century, say they conduct internal reviews to make sure race does not come into play. Their rates are based on the risk that a borrower won't repay a loan, and they say higher rates are fair compensation for greater risk. Joe Belew, president of the Arlington, Va.-based Consumer Bankers Association, said disparity between blacks and whites "probably points to a societal issue that shouldn't surprise anyone." Experts, studies and The Observer's analysis pointed to three reasons why blacks get fewer market-rate loans: Discrimination that can occur throughout the lending process, lower wealth and more credit problems, and less knowledge about the home-buying process. A financial industry representative saw progress on the availability of home loans to blacks. "Twenty years ago we were talking about redlining, that people weren't getting loans," said Paul Leonard of the Financial Services Roundtable in Washington, which represents large financial corporations. "Now we're having a legitimate discussion about whether people are getting the right price." Mal Maynard, director of the Financial Protection Law Center in Wilmington, which studies lending patterns, said lenders now target black neighborhoods for the sale of high-rate loans. "Now what we have is reverse redlining," he said. In 2004, blacks received twice as many home purchase loans as a decade ago. But one in every four is paying a steep price. A high-rate loan requires a borrower to pay tens of thousands of dollars in additional interest, while building less equity. Borrowers fail to repay these loans far more often, losing their homes and ruining their credit. The Observer, in a series that began Sunday, also found that even when major banks own a separate, high-rate loan business -- a common practice -- the high-rate lenders generally don't refer customers for market-rate loans even when they could qualify. It looked at data from 2.2 million mortgage applications processed in 2004. The lenders disclosed which loans had high interest rates, those at least three percentage points above a standard government rate. Kwanzaa and Melvin Smalls used a pair of high-rate loans -- one at 10.5 percent, the other at 12.5 percent -- that totaled $110,000 to buy a house in Charlotte in 2000. But the deal included a lump sum balloon payment of more than $84,000 due in 2015 and broker fees of $5,450, more than twice the usual charge for broker services. The couple -- who were not candidates for a market-rate loan -- weren't able to keep up with monthly payments of nearly $1,050 and filed for bankruptcy a year after closing on the home. Now they are trying to fight off foreclosure. Smalls said she should have been better educated, but assumed the broker wouldn't offer a loan she couldn't afford. "We had the attitude that we were educated people and we were going to go buy a house," she said. "Now they basically can take my house any day." nctimes.com