Minorities more likely to get subprime loans

DENVER - Blacks and Hispanics have been more than twice as likely as whites to take out subprime loans and possibly become victims of predatory lending, according to a study released Monday by the Colorado Civil Rights Division.

The study, using information on loans made in Colorado in 2006, found that 43.1 percent of blacks and 42.8 percent of Hispanics who took out loans received subprime loans, while 20.2 percent of whites did. The disparity was not as great in El Paso County - 36.9 percent for blacks, 35.7 percent for Hispanics and 21 percent for whites - but still was significant, officials said.

Subprime loans became common in recent years as a way to help people with lower incomes buy homes. Such loans often required borrowers, often with poor credit histories, to show little documentation about their income. The loans also carried higher interest rates.

Subprime loans have largely been blamed for the nation's housing slowdown and flood of foreclosures.

About 57,000 loans in 2006 - 24 percent of the total housing loans in the state - were subprime, according to the study, which was conducted by Denverbased BBC Research and Consulting.

Even among people with higher incomes, blacks were far more likely than whites to take out subprime loans, the study found.

For example, 43.1 percent of blacks who made more than $100,000 got subprime loans in 2006. That was just slightly less than the 45.9 percent of blacks earning $25,000-$49,000 who received similar loans, but much more than the 16.6 percent of whites making more than $100,000 who received them.

The Rev. Reginald Holmes, who works with a center that teaches low-income inner-city minorities how to manage money, said the study results show that such groups have been damaged by subprime lending practices.

"This could set people back in terms of wanting to have that dream (of owning a home) because you don't trust anyone anymore," said Holmes, vice chairman of the Financial Education and Economic Transformation Center in Denver.

"I think it might create some gun-shyness in a lot of people."

Subprime loans become predatory when the lender talks a borrower into accepting terms that are not beneficial, usually through excessive fees, prepayment penalties and higher-thanneeded interest rates, said Steven Chavez, director of the Colorado Civil Rights Division. Such lending has contributed to rising foreclosures in Colorado.

Gov. Bill Ritter signed five laws in 2007 to deal with the foreclosure problem, including a measure that licensed mortgage brokers.

Democrats unveiled a bill Sunday that would allow judges to delay foreclosures for three months if the homeowner has made good-faith efforts to make payments.

Ritter said Monday, however, that state leaders will look further at the study to determine if more laws dealing with discrimination and lending are needed.

One way officials will try to combat this is with a campaign in which they partner with community leaders to hear stories of Coloradans who feel they may have been targeted for predatory lending because of their race, Department of Regulatory Agencies Executive Director Rico Munn said.

Cases that appear to be discriminatory will be referred to the civil rights division, he said.