Hot Texan Market Lures Predatory Lenders by Broderick Perkins Hot on the heels of glowing news about the robust Texas real estate market comes a discouraging report that more and more minority home buyers in the Lone Star state need to be wary about being taken by predatory lenders. Texas' median home prices moved out of the $90,000s in 1998 and into the $100,000s most of last year, according to the Real Estate Center at Texas A & M University in College Park. That's largely because demand from the growing ranks of the employed pushed the supply of homes down from 4.5-month supply a year ago to only 3 month's worth by February. Texas led the nation in net job creation this decade thanks to a booming economy fueled by rising oil prices and broad based demand for goods and services in virtually all economic sectors, including manufacturing, construction, finance and services. "A lot of it is lot of it is lower interest rates, but also growing confidence among home buyers in the strength of the economy," said Jack Harris, a research economist at the Real Estate Center. "People are finding that if they have the desired skills they can get a job and maybe if they don't have the skills they can get the job and they are not laying people off. So people feel fairly confident with this so-called wealth effect," Harris added. Indeed the quarterly Texas Real Estate Confidence Index (TRECI) is 0.63 for the second quarter, up 0.03 from the first three months of 2000. The center uses TRECI to monitor confidence levels among segments of the real estate industry. A TRECI of 0.50 is neutral, more than 0.50 is positive and less than 0.50 is negative. The higher the number, the more positive the outlook. At 0.72, Austin has the highest TRECI level up 0.05 from the first quarter. El Paso was second at 0.69, up 0.11. The metro areas of Dallas, Houston, Fort Worth-Arlington and San Antonio have a positive TRECI, and all but the Dallas area have a level higher than the one recorded for the first quarter. "There aren't any major metro areas showing clear signs of slowing in the coming months," said Dr. James H. Leigh, associate professor of marketing for the Lowry May College and Graduate School of Business. Preying on buyers Unfortunately, aware an increasing number of buyers are out shopping for homes, some lenders are taking advantage of those who are not so savvy about the lending process. "Access to the Dream 2000", a study of 1996 to 1998 data by Consumers Union and the Austin Tenants' Council, found that high-cost subprime lenders are making substantial inroads. Black communities have been hardest hit, the report says. In Texas 7.8 percent of black borrowers got subprime home purchase loans, compared to only 2.3 percent for white borrowers, according to the study. The refinance market record was worse. In 1998, 27 percent of black borrowers refinanced their homes through a subprime lender, compared to 15.3 percent for Hispanic borrowers and only 6.3 percent for whites. "Subprime loans are designed for people with bad credit, and it is abusive for lenders to use them indiscriminately to target citizens with darker skin color or who live in the 'wrong' ZIP code," said Mary Dulan, fair housing director with the Austin Tenants' Council. Conversely, the study also found that some prime lenders are developing a favorable track record in minority markets, partly because of a federal law called the Community Reinvestment Act. Overall, the Texan home loan market grew significantly over the three-year study period and home purchase and refinance lending increased among all ethnic groups. However, black and Hispanic applicants remained a much smaller proportion of the total applicant pool relative to their proportion of the population. Compared to 1996, home purchase loans to Hispanic applicants increased 22.6 percent, loans to white applicants increased 21.9 percent, and loans to black applicants increased only 19.4 percent. The report also found: Lenders in low income census tracts are more often expensive subprime or manufactured home lenders. Of the 10 lenders making the largest number of home purchase loans in low-income census tracts, six were manufactured housing lenders. Of the 10 lenders making the largest number of home purchase loans to black applicants in low-income tracts statewide, four were manufactured housing lenders, three were subprime lenders, and two were large FHA-program lenders. In Dallas, eight of the top 10 refinance lenders to black low- income borrowers were subprime lenders, compared to only two for whites. In Houston, six of the top 10 refinance lenders to blacks in low-income areas were subprime, including the two largest. | 
