Study: Subprimes aimed at minorities
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TESS VIGELAND: Here’s a sadly-familiar headline: Foreclosures hit an all-time high in the fourth quarter of last year. That’s according to the Mortgage Bankers Association. And more and more homeowners are falling behind on their monthly payments.
One of the accusations that surfaced fairly early in the subprime crisis is that predatory lenders targeted minorities for the riskiest and most-expensive home loans. Today the Illinois attorney general issued subpoenas to Countrywide and Wells Fargo as part of an investigation into pricing disparities. And a new report shows accusations of predatory lending during the housing boom might have merit.
From the Americas Desk at WLRN, Marketplace’s Dan Grech has more.
DAN GRECH: The report looked at the portfolios of 35 subprime lenders that were active in 2006 but went bankrupt or were sold in 2007. It studied seven urban markets, including New York, L.A. and Cleveland. And it found that high-risk loans made up 20 percent of all loans in predominantly minority communities, compared with just 4 percent in mostly white areas.
KEVIN STEIN: When we look at the data, it does seem that race is a larger factor than income.
That’s Kevin Stein with the California Reinvestment Coalition, one of six community groups that contributed to the report. He says minority communities have long had trouble accessing credit through mainstream banks. That left room for predatory lenders to swoop in, make a killing, and leave.
STEIN: So those guys are out of business, but guess what? Thousands upon thousands of their loans are still sitting in our communities, almost like a ticking time-bomb waiting to go off in the form of foreclosure that has these larger ripple effects on the broader community.
Carlos Gutierrez is a mortgage broker in Minnesota who specializes in home loans to Hispanics.
He says his clients can be susceptible to aggressive lending practices like low teaser rates or no down payments.
CARLOS GUTIERREZ: I know among the Hispanics there’s a huge amount of trust and loyalty that they place in people that they do business with. And some people do take advantage of that.
The report recommended new laws to protect homeowners and tenants from foreclosure.
I’m Dan Grech for Marketplace.
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