Minorities Find Subprime Mortgages Buy Big Disappointment

Friday, Feb 29, 2008
By Sean Mussenden and Bertrand M. Gutierrez

WASHINGTON -- A house. A yard. A fence. It's supposed to be the American dream. But for some black and Hispanic homeowners, the dream has been cut short with the rude awakening that can come with costly subprime loans.

Mortgage lenders were more likely to sell subprime loans to blacks and Hispanics than to whites during the recent housing boom. Consequently, minorities are at a greater risk than whites of losing their homes as the real-estate downturn deepens.

Advocates for low-income borrowers say that the racial disparity has added a new element to an old, unsettled debate over discriminatory lending practices, though banking-industry officials say the picture is far more complicated. Terri Martin is one of thousands caught in the middle of the debate. Martin nearly lost her $71,300 home in Winston-Salem two years ago after the interest rate on her subprime mortgage jumped to 11 percent, leaving her with monthly payments of more than $800. A lawyer helped her renegotiate the terms to avoid foreclosure and remain in her home.

"If I did not have God on my side, I probably would have committed suicide," said Martin, a school-bus driver and mental-health worker. "I was fighting to keep my house, and all my income that I did have coming in was going to pay my mortgage and to keep my other bills here going, so, yeah, it was rough."

Houses purchased with costlier, subprime mortgages like Martin's are eight times as likely to be foreclosed on as cheaper, prime mortgages, industry statistics show. Though the growing wave of subprime foreclosures is more pronounced in certain high-cost real estate markets, the issue is gaining attention in nearly every part of the country.

A Media General News Service analysis of mortgage data collected by the federal government showed that in the Southeast in 2006 - the most recent data available - the percentage of mortgages taken out by blacks that were subprime was double that of whites.

The analysis showed a similar, though slightly smaller, gap between Latinos and non-Latinos. In North Carolina, one of five residential mortgages to whites in 2006 was subprime. For blacks the ratio rose to almost one in two. One of three mortgages to Latinos was subprime, compared with one in four for non-Latinos.

In some poorer counties elsewhere in the Southeast, the analysis showed, the proportion of subprime loans to minority borrowers was even higher. In dozens of minority-heavy counties in Mississippi, Alabama, South Carolina and Florida, more than seven in 10 loans to blacks were subprime.