Banks prone to sell minorities pricy loans

By Joanne Morrison

WASHINGTON (Reuters) - The largest U.S. banks sold expensive subprime loans more frequently to minorities than whites, according to a study released Wednesday by a community activist group.

Fair Finance Watch found that big lenders such as Citigroup, JP Morgan Chase, Wells Fargo and UK-based HSBC extended higher-cost subprime loans to African-Americans and Latinos far more frequently than whites, according to an analysis of 2006 mortgage lending data released this week.

At Citigroup, for example, blacks in the New York metropolitan area were sold subprime loans 4.41 times more frequently than whites, according to the study.

"The problem is many of these lenders confine people of color to high-cost loans even though they would be entitled to normally priced loans," said Matthew Lee, executive director of Bronx, New York-based Fair Finance Watch.

"Alongside the chaos in the subprime industry, predatory lending has grown and not diminished," warned Lee.

Officials at Citibank defended their lending practices, which was based on credit scores and other criteria including loan-to-value and debt-to-income ratios.

"We consider each application by the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis," Citibank said in a statement, adding that the bank has ongoing dialogue with community groups to explore ways to make fairly priced credit more available.

Subprime mortgages, which have been increasingly popular in recent years, carry a higher interest rate and are offered to borrowers who often have a poor credit history and lower incomes. While the loans have helped to increase home ownership, they have been at the center of a recent surge in mortgage defaults.