Subprime loans still highest among Minorities in 2008

A study done by The Times revealed that in 2008 black borrowers were twice as likely to have received Subprime Mortgage Loans as their white counterparts in both the Lake and Porter Counties in Indiana.

Arthur Julke of Hammond, Indiana and homeowner spoke about his situation. His interest rate is 11.69 percent. He stated that he is currently delinquent by thousands of dollars on his mortgage payments of over nine hundred dollars. Mr. Julke refinance his home in 2005 with Household Financial Lending on the belief that it would benefit him financially. The rate Mr. Julke received was six points higher than the 2005 average rate on a thirty year fixed prime mortgage loan. The loan would be the beginning of his financial nightmare. Mr. Julke stated it’s like a bad dream. He can’t snap his fingers and come out of it.

Mr. Julke has been attempting to modify the loan with little success and it wasn’t until The Times contacted the lender in regard to Mr. Julke’s loan that they were willing to modify the terms of his mortgage. Mr. Julke’s experience however is more the rule than the exception when it comes to subprime loans issued to minorities in predominately minority communities even after the nation new about the financial crisis such lending caused.

Black in two counties received higher priced mortgage loans over thirty percent of the time, seventeen percent among Hispanic borrowers and eleven percent among white borrowers. The data improved over the 2006 and 2007 figures but remains higher than the national average. The national average for subprime loans for whites is eleven percent; Hispanics is sixteen percent and Black at twenty one percent.

Mr. Julke situation is common among the thousands of minorities who took out subprime loans within their communities and those same communities are still receiving the lion share of higher rate loans even after the market crumbled.

Northwest Indiana Reinvestment Alliance, Reginald Guy who is a loan modification specialist stated that the lenders that originated these loans knew the potential for harm but subjected would be homeowners to them anyway. Lenders steered potential homebuyers toward these loans and often sprung the higher interest rate on them at the closing table.

Tracy Moore, a first time homebuyer from Hammond, Indiana said it was easy; it was just a click away on the internet. She obtained her adjustable rate loan for one hundred and fifteen thousand dollars over the interest and faxed all her materials to a mortgage banking firm.  Things turned bad for her in May when her income dropped at her job. Her interest rate increased in December to eight point eighty eight percent which was three points higher than the national average of prime loans at the time. The increase cost her three hundred and fifty dollars more a month in additions to delinquency fees.

Tracy says when she got the loan she was ignorant and happy but didn’t have all the facts up front. She has received a foreclosure notice and is seeking a loan modification. She doesn’t want to lose the home that her children have come to love and has hired an attorney to help her with the process. She is seeking a fix rate modification.

Executive Director of United for a Fair Economy in Boston, Brian Miller stated that he wasn’t surprised by the figures. Minorities have received the lion share of subprime loans due to the disparities that have been in the country for years. The subprime loans presented to these communities came easy as these communities were accustom to receiving higher rates from payday loan stores and pawn shops. The Country as a whole has a long history of predatory lending in communities of color.

Julia Gorman told the United States House in December that “Reckless and abusive lending practices created a nationwide foreclosure crisis that has had catastrophic consequences for families, communities, especially of communities of color and the overall economy.

Julia who is the Senior Policy Counsel for the Center for Responsible Lending revealed that the agency did a study that showed that loans made in low to moderate income communities that featured terms of thirty year fixed rates have lower default rates than those loans that were subprime. The lesson according to Sonia Garrison is that it’s the features of certain loans that cause the trouble and not the borrowers that make the loans risky. Features such as balloon payment provisions, adjustable rates and other penalties that end up costing the borrower unexpected costs and expenses.

Mr. Julkes and his wife initial were lured by the prospect of money up front to refinance their mortgage. They were approved for a ninety three thousand dollar mortgage that carried over two hundred five thousand dollars in finance charges. The Julkes experience stick shock and the debt sank them. The filed for bankruptcy in 2006 to avoid the foreclosure. Mr. Julkes later retired and his wife past away last year from cancer. Mr. Julkes found himself once again facing foreclosure and his lender denied his hardship assistance. The bank after being reached by The Times reversed their decision and offered Mr. Julkes the opportunity to take part in the lenders permanent hardship and foreclosure assistance program. Mr. Julkes has a new mortgage now that carries and interest rate of 5.25 percent and is fixed. The loan will save him over four thousand five hundred dollars a year.  Mr. Julkes is relieved that some of the pressure is off and happy to hear good news in his favor.

Twenty lending institutions that are based outside of Indiana approved the majority of the subprime loans in Lake and Porter counties in Indiana during the year 2008. Several of those firms have been accused of predatory lending and have denied any wrong doing. The NAACP filed lawsuits against the major players last year. The Major players included HSBC Mortgage Corporation and Wells Fargo and both have denied any wrong doing. The NAACP also filed similar suits in 2007 against ten lenders in regard to the same concerns. The cases are still pending in the United States District Court for the Central District of California.

Mr. Julkes just last month received a letter in regard to a class action settlement involving a group of certain criteria nationwide. The suit is against Household Finance, Beneficial and Decision One or HSBC. The suit was filed in Massachusetts in 2007 and claimed that the companies engaged in predatory lending. HSBC Finance stopped originating residential loans over a year ago.

High priced lending in Indiana has dropped by fifty four percent in 2008. Risky lending however can also be found along Census tracts and were the median income is below the national average. The 2008 median income for Lake County was fifty thousand dollars and for Porter County is was sixty two thousand.