Nettie Pelton is one. Valerie Still is another. Other Pittsburgh-area residents are in the same predicament.
They have subprime home mortgages or personal loans that are forcing some homeowners to pay interest payments as high as 28 percent.
Compare that with today's prime mortgage interest rate on a 30-year conventional loan of about 6 percent and home equity loan rates in the 5 percent to 7 percent range.
According to a study released Tuesday by Acorn — a Washington, D.C.-based organization that works to improve housing conditions — minorities have the highest rejection rates when applying for prime mortgages to purchase houses or to refinance existing mortgages. It found that the six-county Pittsburgh region had the sixth-highest increase in rejection rates for African-American applicants seeking prime loans compared to white applicants during the period 1996 to 2001 in 67 metropolitan areas surveyed.
Pelton said a representative of Equity One Inc., a New Jersey-based lender, knocked on her door in Beltzhoover in September 2001 and she agreed to two mortgage loans.
"One was a refinanced loan of $22,500 with an annual percentage rate of 12.44 percent, and the other was a second mortgage at 23 percent," she said. No truth-in-lending statement apparently came with the second loan, she added. The refinanced loan, with 179 payments of $228.53, has a balloon payment of $19,184.52, payable in September 2016, according to Maryellen Hayden, a Pittsburgh-area organizer for Acorn, the Association of Community Organizations for Reform Now, who reviewed Pelton's loan papers.
An Equity One spokeswoman in New Jersey would not confirm Pelton's status as a customer.
The situation for Valerie Still, of 305 N. Graham St., East Liberty, involved a $3,000 loan at 28 percent interest and a $7,000 loan at 24 percent from Household Finance. She has paid $220 a month since April, and the principal still is at $10,000 for both loans.
On disability, she said without the help of her daughter and granddaughter who live with her, she could not make the payments.
Subprime loans not only carry higher interest rates and fees than prime loans, in many cases, they involve what has come to be known as predatory lending.
The Acorn study also found that:
In 2001, subprime lenders in this region accounted for 34.8 percent of all the refinancing loans made to African-American homeowners, 22.1 percent of all refinanced loans to Latinos but only 8.1 percent of loans made to white homeowners who refinanced, the study showed. In the six-county area, whites make up 89.5 percent of the population, African-Americans 8.1 percent and Latinos 0.7 percent, according to the 2000 U.S. Census.
In addition, almost half (49.6 percent) of low-income African-American borrowers received subprime loans. Moderate-income African-American homeowners didn't fare much better since 46.8 percent of them also ended up with subprime loans.
Acorn President Maude Hurd said the fight to eliminate subprime lending is being fought in Congress, but that some of the nation's lenders are lobbying against laws currently in Congress that would halt the practice. Lenders also are seeking to overturn laws passed in New York City, Los Angeles and in several states against subprime lending, she said.
Hurd cited her organization's successful fight against two major subprime lenders — Household Finance and The Associates — forcing them into huge predatory lending settlements. Last month, Household agreed to pay up to $484 million to settle claims it duped tens of thousands of mostly poor home buyers with hidden and unnecessary costs. Household has 95 offices in Pennsylvania, including offices in Bethel Park, Monroeville and Greensburg.
Acorn's study analyzed data released by the Federal Financial Institutions Examination Council about the lending activity of more than 7,800 institutions covered by the Home Mortgage Disclosure Act. Acorn researcher Valerie Coffin said the study does not include all subprime lending in the nation. She said unless the institution is a prime mortgage lender, and issued in excess of 50 loans, it is not covered under federal law to report who received its mortgages.
Locally, Starr Marshall-Cash, executive director of the Pittsburgh Community Reinvestment Group, said she expects her organization, consisting of city neighborhood organizations, to issue a report in the near future about the disparities in prime mortgage lending in Pittsburgh minority-concentrated neighborhoods.
"Our initial information finds that the same appraisers, title companies and lenders seem to be involved in subprime lending," she said.
