NEW YORK (CNN/Money) - African-Americans and Hispanics are disproportionately represented in the subprime home refinance market. And the racial disparity between whites and minorities actually increases as incomes rise.
Those were among the key findings of a study released Wednesday by the Center for Community Change, a non-profit consumer advocacy group.
The study, entitled "Risk or Race?," revealed that lower-income African-Americans receive 2.4 times as many subprime loans as lower-income whites, while upper-income African-Americans receive 3 times as many subprime loans as do whites with comparable incomes.
At the same time, lower-income Hispanics receive 1.4 times as many subprime loans as do lower-income whites, while upper-income Hispanics receive 2.2 times as many.
Subprime lenders provide high-interest loans to borrowers with bad credit or no credit history -- those who do not qualify for the prime market. Many offer a legitimate service. But the "wave of foreclosures...in the subprime market" indicates that many borrowers are being forced into mortgage loans they cannont afford, the study found.
Predatory lending occurs when banks and mortgage providers target individuals with a lot of built up equity in their homes, talk them into refinancing their loan and then saddle them higher interest rates and higher monthly bills. When they default on the loan, the banks collect the equity.
Foreclosures have a negative impact on entire neighborhoods, as the repossessed homes often stay vacant for extended periods and depress the value of the surrounding properties.
The CCC study analyzed the 331 metropolitan statistical ares (MSAs) in the U.S. and ranked the areas using a variety of subprime lending measures. It found that El Paso, Texas, is the nation's leader in subprime lending, where 47.3 percent of loans made were subprime, well above the average of 25.3 percent.
At a level of 5.93, St. Louis has the nation's highest disparity ratio between upper-income African-Americans and upper-income whites. It was one of five metropolitan areas where this disparity ratio was greater than 4. In another 18 cities, this ratio was between 3 and 4.
Sen. Paul Sarbanes, D-Md., chairman of the Senate Banking Committee, has introduced measures that will further restrict subprime lending practices. There is a similar measure in the House of Representatives.