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Author: Sarah Lindenfeld Hall; Staff Writer Edition: Final Black people who refinance their homes in the Raleigh-Durham area are more than four times as likely as white borrowers to get loans that carry high interest rates, according to a national study conducted to influence Congress to approve national legislation to regulate so-called predatory lenders. According to the study by the Center for Community Change, the Triangle metropolitan area is among the 10 regions in the nation where the loan disparity between blacks and whites is greatest. "It documents the problem," said Malcolm White, communications director for the Self-Help Credit Union in Durham. The credit union lends money to black homebuyers and small business owners. "It shows that home lending is a two-tiered economic system in this country and continues to be." Subprime, or high-interest, loans typically go to high-risk borrowers. Homeowners who wanted to refinance once sought information on their own, but in recent years, mortgage brokers have marketed high-interest loans to specific communities, sometimes aggressively. More than 25 percent of refinanced loans nationwide are subprime; the figure in the Triangle is comparable. Housing experts cite a number of reasons for the disparity, including the growing number of subprime lenders who can be more aggressive than mainstream financial institutions in marketing to minority homeowners. And minority homeowners, sometimes the first in their family to buy a home, are sometimes less financially sophisticated and more easily succumb to sales tactics offering cash fast. "Subprime lenders target their marketing to this population," said Peter Skillern, executive director of the Community Reinvestment Association of North Carolina. He has testified before Congress on the issue. Skillern hasn't studied the report but says the high numbers in the Triangle could be because of the strong middle-class black population who have homes to refinance. Not all subprime loans are predatory loans, in which lenders push loans that include high fees and penalties. Some seek the loans because it's the only way they can qualify for credit. But the report was released at the same time Sen. Paul S. Sarbanes, a Maryland Democrat, introduced legislation aimed at restricting predatory lending. Skillern said the bill is, in part, modeled on a North Carolina law passed in 1999 that went into effect in 2000. The law restricts fees and prohibits prepayment penalties on mortgages of less than $150,000. The Center for Community Change used federal numbers of refinanced loans in 2000. Paul H. Stock, executive vice president and counsel for the N.C. Bankers Association, expects local statistics would improve because of the new state legislation. "The passage of time and the passage of legislation would suggest to me that this same study being reported in another two or three years that we will not be on any lists of ... shame," Stock said. The national study found lower-income blacks nationwide get 2.4 times as many high-interest loans as lower-income whites. Upper-income blacks have three times as many costly loans as whites with similar incomes. As another indicator of disparities between blacks and whites, the study looked at differences in loans in predominantly white Census tracts and predominantly black Census tracts. In the Raleigh-Durham-Chapel Hill Metropolitan Statistical Area, 20.26 percent of the refinanced loans were subprime in white Census tracts, compared with 36.99 percent in diverse Census tracts and 55.17 percent in black Census tracts. The report's authors say their findings don't prove there is widespread discrimination in the subprime lending market but document the need to explore the issue more thoroughly. Studies show homeowners who get a subprime loan are more likely to become the targets of foreclosure, said Debby Goldberg, co-director of the center's neighborhood revitalization project. And often those homeowners are concentrated in the same neighborhood. "If you have a concentration of subprime loans in a neighborhood and a number go into foreclosure, not only are the individual families whose homes are foreclosed harmed by that, but it has an impact for the whole neighborhood," Goldberg said. Caption:
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