Copyright 2002 St. Louis Post-Dispatch, Inc.  
St. Louis Post-Dispatch (Missouri)
May 3, 2002 Friday Five Star Lift Edition
SECTION: EDITORIAL; Pg. B6

LENGTH: 396 words

HEADLINE: AN UNENVIABLE DISTINCTION

BODY:
RACIAL JUSTICE

RICHARD CAVER, a Bi-State bus driver from Jennings, has put a face on predatory lending. He and his wife got a $2,000 home improvement loan from Household Finance two year ago. The couple ended up being persuaded to refinance their house, buy a second-mortgage line of credit and credit life insurance that was good for only five years. These additions caused the mortgage to shoot up to $72,425 from $47,000 and forced the couple to eventually declare bankruptcy.

A new study says sub-prime lending by Household Finance and other companies remains a major problem among African-Americans with above-average incomes. The racial disparity is highest in St. Louis, according to a study by the Center for Community Change, a research and advocacy group. It says blacks here were nearly six times more likely than their white counterparts to take out sub-prime loans. These loans can have an annual interest rate between 1 percentage point and 4 percentage points higher than a conventional loan.

Some sub-prime lending occurs because the companies aggressively advertise their services to minority homeowners. On the other hand, blacks with poor credit history may feel sub-prime lenders offer their only chance to refinance their homes.

Democratic Sens. Dick Durbin of Illinois and Paul Sarbanes of Maryland have teamed up on a bill to take some of the economic sting out of sub-prime lending. The bill would ban pre-payment penalties after the first two years of any high-interest sub-prime loan, and ban up-front payments or financing of credit life insurance, a practice that helped to push the Jennings couple into bankruptcy. Conventional lenders should be encouraged to market more information to black consumers who may think these lenders are unwilling to make loans to them.

A region worrying about racial polarization cannot feel good about leading the list of cities where the racial disparity in mortgage rates is greatest. St. Louis wishes to be regarded as a good place to do business, live and raise a family. It also should want to be high on the list of cities that blacks regard as good places to live, such as Atlanta and Houston, which do not have high lending disparities. Sub-prime lending practices can only hurt St. Louis' efforts to rate high among cities admired by blacks and to create a diverse workplace.

LOAD-DATE: May 3, 2002