Refinance Blues

DATA: Click here to download a list of top 10 metropolitan areas with the most high-cost loans.

Chicago area homeowners most likely to have a high-cost loan were least likely to benefit when banks lowered mortgage payments or threw out cash life lines last year.

The Chicago Reporter analyzed recently released federal mortgage lending data by the Federal Financial Institutions Examinations Council and found that there were just 175,000 successful refinances for new interest rates or to withdraw equity last year in the Chicago metropolitan area, though nearly 370,000 applications were submitted.

White and Asian borrower fared the best, though black and Latino homebuyers in 2006 had higher rates of high-cost loans. Black and Latino homeowners received nearly 50 percent of all high-cost loans in 2006 compared to nearly 22 percent of prime rate loans. High-cost loans are loans that are at least three percentage points above the U.S. treasury standard.

This marks Chicago’s fourth consecutive year as the metropolitan area with the most high-cost loans. The Reporter’s 2007 analysis shows that Chicago had almost 61,000 high-costs loans, about 20 percent more than Los Angeles, the metropolitan area with the second largest number of high-cost loans.

The Reporter found that in 2007:

–¢ The approval rates for white people was 75 percent, 72 percent for Asians, 59 percent for Latinos and 54 percent for black borrowers.

–¢ Poor credit history denied more black and Latino applicants than any other shortcoming and thwarted white applicants as much as lack of collateral. Whereas, debt-to-income ratio rejected more Asians than any other shortcoming.

One Latino family with a disabled child and two high-cost mortgage loans asked the Chicago Homeowners Coalition for People with Disabilities for help refinancing. The Brighton Park family has a documented income of $1,400 each month and pays $1,800 monthly on their $225,000 house.

Their situation, like so many others in their shoes, is hopeless, said Jeanne Sherman, the coalition’s homeownership coordinator. Each week, Sherman gets 55 calls from people who want to refinance because they are on the verge of foreclosure. Most of their clients are African American or Latino.

“We see them go through the process now for refinancing and get turned down and get told flat, there’s nothing they can do,” Sherman says. “This has been devastating for us.”

Neighborhood Lending Services, a Chicago lender that serves many African Americans and Latinos, has been swamped with refinancing applications in the past two years, many from people on the verge of foreclosure. “We’re still seeing people who are almost about to get ready to move out of the house,” said Versi Garrett, director of lending.

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