Minorities Likely to Have Higher Mortgages

October 25, 2007; As originally appeared in The Connecticut Post

DANBURY — Black and Hispanic residents are twice as likely to receive higher-cost mortgages than their white counterparts, according to an expert who spoke Wednesday during a symposium on predatory lending.

Joshua Silver, vice president of policy research for the National Community Reinvestment Coalition, said the disparity often results from "steering," in which a mortgage broker will steer a borrower into a higher interest rate than they could otherwise qualify for. Silver spoke during a symposium at Western Connecticut State University that was organized by the United Way of Western Connecticut and the Housing Development Fund.

"Steering is taking a borrower with credit worthiness for a prime loan and steering them into a higher cost, subprime loan," he said. This, he added, strips equity from the community.

While steering affects low- and moderate-income borrowers, who may be less knowledgeable about the mortgage process, the disparity actually increased for higher-income, minority borrowers.

In Bridgeport, black borrowers at a higher income level are 3.57 times more likely to receive a high-cost loan than their white counterparts in a similar income bracket. Black low- to moderate-income borrowers in Danbury are 2.1 times more likely to receive a higher-cost loan, while upper income black borrowers are 2.73 times more likely to receive a higher-cost loan.

Silver said the reason for disparity in upper income levels is that the percentage of higher income white borrowers steered into higher cost loans drops dramatically, while the percentage of black and Hispanic borrowers in higher income brackets steered into higher cost loans remains mostly constant.

Melvina Peters, the home-buyer education coordinator for the HDF, said one of the keys to addressing the disparity is educating for potential homeowners looking for a mortgage. "We can never provide enough education for our clients," she said. "An educated consumer is everyone's best protection. People have to know how to ask the right questions."

Those questions, she said, include asking about the interest rate and the terms of the loan. Borrowers should also ask how much they can borrow as determined by the lender and what the lender based their decision on.

"If the amount of a loan you're being approved for seems high, there could be something wrong," she said.

Potential borrowers should also ask what fees are being made part of the loan package. Application fees can add hundreds of dollars to a mortgage and loan origination fees can be as much as 5 percent of the total loan, she said.

The HDF, a nonprofit organization, provides counseling for home buyers and financial assistance for those seeking to buy a home in the region. The organization, with a grant from the United Way, recently opened a Housing Resource Center on West Street in Danbury. The organization also has offices in Stamford.

The center, which also provides rental assistance, can help a potential homeowner determine their mortgage readiness and provide an action plan to become mortgage ready. The organization also offers financial assistance, including zero- to low-interest down-payment loans.

For information about the center, visit www.hdf-ct.org, or call 969-1830, ext. 15.