WASHINGTON – Maryland’s deluge of foreclosures has hit minority communities particularly hard, as lenders foisted high-cost loans on them more often than whites, according to a new report.
Subprime mortgages, those with higher interest rates due to borrowers’ poor credit, have been handed out to minorities, even those with high incomes, according to the report released Wednesday by the Association of Community Organizations for Reform Now.
More than 2,200 foreclosures were reported in Maryland in July and nearly half of those came from areas with the largest Latino populations: Prince George’s and Montgomery counties, according to RealtyTrac, a national foreclosure database.
The current loan fallout resulted from aggressive mortgages offered in 2005, said Aracely Panameno, director of Latino Affairs at the Center for Responsible Lending.
“The worst is yet to come,” she said. “The foreclosures we’re going to be seeing are related to the flawed nature of the mortgage products themselves.”
The adjustable rate mortgage, or ARM, is one of the products Panameno found at fault. These mortgages have low introductory interest rates that increase incrementally, often to levels that are impossible to pay.
“High-cost mortgages are resulting in middle-class people being squeezed by high-cost loans,” said Stuart Katzenberg, head organizer of ACORN’s Maryland office.
The ACORN report found that in the metropolitan area made up of Bethesda, Gaithersburg and Frederick, black home buyers were 5.4 times more likely than whites to receive high-cost loans, and Latinos received high-cost loans 6 times more than whites.
Good wages were no protection from the lending practices, the report found: High-income blacks were 7.5 times more likely to receive high-cost loans than low-income whites, and high-income Latinos were 8.2 times more likely to get saddled with high-cost loans than high-income whites.
In the Washington, D.C., metropolitan area, which includes Arlington, Va., and Prince George’s County, 25.9 percent of all refinance loans were high-cost loans.
According to ACORN’s report, Fannie Mae and Freddie Mac have estimated that anywhere from one-third to one-half of all subprime loan recipients could have qualified for a lower-cost mortgage.
The ACORN study, “Foreclosure Exposure,” measured a year’s worth of high-cost lending in more than 150 metropolitan areas in the United States beginning in April 2006. ACORN obtained its data under the Home Mortgage Disclosure Act.
“In the course of doing business you anticipate a certain natural percentage of loans that will go into foreclosure,” Panameno said. “You really don’t know when a family may be hit by a job loss or a severe illness that decimated the family’s finances.
“What we’re seeing now, nothing like this has occurred since the Great Depression.”
Mosi Harrington’s clients at Housing Initiatives Partnership in Hyattsville too often were “taken to the cleaners” with subprime mortgages before they got to her service.
Spanish-speaking companies offered her clients full-service home-buying assistance, but not all of the services were reputable.
“I think it made them feel more comfortable, that this was family,” the executive director said. “But in actual fact they were not getting good deals.”
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