High-cost home loans: Austin focus (Nov. 2002).

"Austin remains a sharply divided city, with growth and prosperity disproportionately spread across the western hills while subprime lending is concentrated in the heavily minority near east central neighborhoods. Manufactured home lending dominates neighborhoods further east."

• Many Austinites are now experiencing a costly refinance loan hangover triggered by a hot housing market and the introduction of home equity lending in Texas in 1998. Consumers Union analyzed the four-year 1997-2000 lending period, and found a rapidly expanding subprime loan market, particular for refinance.

• Prior to the new home equity law, the subprime lending industry had a weak presence in Austin — about 5.8 percent of all single family home secured loans in 1997, but the figure grew to 10 percent of all loans by 2000 and 28.4 percent of all refinance loans.

• Subprime companies by 2000 achieved very high refinance penetration rates among minority borrowers and in minority neighborhoods:
  — 58.5% of refinance loans to Black borrowers and 40.3% of refinance loans to Hispanic borrowers in 2000 were originated by subprime companies.
  — Maps demonstrate that subprime loans are concentrated in census tracts east of IH 35.

• Black and Hispanic borrowers who apply to traditional prime lenders are denied at about twice the rate of White borrowers. This disparity is substantially reduced for borrowers who apply to subprime companies, and especially among higher income borrowers. While subprime companies have generally higher denial rates than prime companies, they deny the different ethnic groups at closer to the same rates.

• Subprime refinance penetration is highest among Black women, totaling more than 45% over the four year period. By contrast, subprime companies accounted for less than 10% of refinance loans to White men.

• Five of the top 15 refinance loan lenders in Austin were subprime companies in 2000, and these five companies alone made nearly half the refinance loans to Black borrowers and a quarter of the refinance loans to Hispanic borrowers.

• Of the major bank lenders in the Austin area, Wells Fargo, Bank United and Guaranty Federal made relatively few loans to minority borrowers. Bucking the trend was Bank of America, which made more loans to Hispanic applicants than its Austin marketshare.