Hispanics and African- Americans in Colorado cities who received mortgages from the nation’s largest lenders in 2004 were 3.4 to four times as likely as whites to receive high- interest-rate loans charging 8 percent or more a year.
Those Colorado ratios are based on a survey of the nation’s 25 largest mortgage lenders conducted by the Charlotte (N.C.) Observer newspaper.
African-Americans in both Colorado and the U.S. received higher-interest-rate mortgages at four times the rate of whites. But for Hispanics, the ratio was 3.4-to-1 in Colorado versus 2-to-1 in the U.S.
Among African-Americans in Colorado metro areas taking a mortgage from a major lender last year, 14.3 percent received high-rate loans. For Hispanics, 12.1 percent of mortgages received were high-rate.
Only 3.6 percent of the mortgages made to white borrowers, by contrast, were considered high rate.
“Subprime lenders do target minority communities,” said Rex Wilmouth, executive director of the Colorado Public Interest Research Group.
But the higher interest rates on those loans can make it more difficult to keep up with mortgage payments, creating a self-fulfilling cycle of defaults.
“The people who can’t afford the loan get the worse rates and have to pay more,” Wilmouth said. “It is an evil circle.”
Unfamiliarity with the home- buying process may hamper minority borrowers from getting the best deal, said Tony Hernandez, director of the Colorado Fannie Mae Partnership Office.
About half of whites described the homebuying process as confusing, while nearly 6 out of 10 African-Americans and 8 out of 10 Hispanics did, according to a Fannie Mae survey.
“Nobody is comfortable with the homebuying process,” Hernandez said.
First-time homebuyers sometimes are so happy to get an approval that they fail to shop for a better deal.
Hernandez recommends mortgage borrowers talk to at least three lenders before making a decision.
A Denver Post computer analysis in 2001 found that blacks in Denver were 3.5 times and Hispanics 2.5 times as likely as whites to borrow from subprime lenders, who charge higher interest rates.
A borrower’s income mattered less than race or ethnicity in explaining the gaps, both the Post and Observer surveys found.
In Denver and its suburbs, a black family earning more than $70,000 a year was more likely to get a subprime home loan than a white family earning less than $30,000 a year, according to the 2001 study. Following the Post stories, Fannie Mae, the nation’s largest provider of home mortgages, and the Responsible Lending Task Force created a $3 million emergency mortgage fund.
The fund offered victims of predatory lending the chance to refinance into less expensive, lower-interest-rate loans. But that program has not been used, Hernandez said.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
