KEY POINTS:
Minority and housing activists in the United States say unethical lending practices and consequent foreclosures are hurting minority groups disproportionately.
Researchers agree that minorities are more likely than whites to get high-cost mortgages, but analysts can't agree why.
Do zip codes like 90047 in southern Los Angeles have
a high foreclosure rate because African Americans were forced into high-cost loans? Or is the area's foreclosure rate the result of economics?
In May, Alvin Clavon received a foreclosure notice on the simple, Spanish-style house in South Los Angeles that he shares with his wife and three boys.
They bought the place in 2003 with a fixed-rate loan. They painted the walls, fixed the yard and made friends with the neighbours, who let the Clavon boys pick their basil.
In 2005, Mr Clavon worked with a mortgage broker to refinance his home with another fixed-rate loan. But on the night before signing, the family was offered an interest-only, adjustable-rate mortgage.
Mr Clavon, a 35-year-old executive assistant at a bank, said he felt stuck. The ball was rolling, he trusted his broker and so the next day, he signed the loan.
"Turned out to be the worst thing I could have done," said Mr Clavon, who like so many others in danger of losing their home to the US housing crisis, is African American.
The Clavons' zip code, 90047, has one of the largest black populations in the city, and also one of the highest rates of foreclosure - a common combination.
Study after study shows that minorities are more likely than whites to get subprime mortgages, which are high-cost loans made to people with poor credit.
In its heyday earlier this decade, the subprime market was cheered as an avenue through which historically shut-out borrowers could get loans. That frequently meant minorities.
So long as home prices rose, the subprime market seemed a positive example of how to increase home ownership, but as the housing market weakened this year, many began to question whether the loans were fairly priced.
In September, the Federal Reserve released a study that found 52.8 per cent of African-Americans got a high-cost home loan when they refinanced in 2006, compared to 37.7 per cent of Latinos and just 25.7 per cent of whites in the same year.
A similar study by the Association of Community Organisations for Reform Now, known by its acronym ACORN, in September found the same pattern even when income was equal.
The ACORN study, authored by Liz Wolff, found upper-income blacks were 3.3 times, and Latinos 3 times, more likely than upper-income whites to have a high-cost loan when purchasing a home in 2006.
"I keep hoping one day I'll do a study where race doesn't play a part," she said.
"But clearly, there is a racial bias."
Jay Brinkmann, vice president of research and economics at the Mortgage Bankers Association, disagrees.
He believes that if researchers could account for all the factors that go into pricing a mortgage, they would find race doesn't matter.
"The pricing is based on risk, not race," he said.
The answer may be decided in court.
In July, the National Association for the Advancement of Coloured People (NAACP) filed a discrimination suit against 11 of the country's largest lenders, saying minorities are steered toward high-cost loans more often than whites, even after all risk factors are considered.
The ACORN study found that high foreclosure rates cause higher rates of crime, lower tax revenue and property values.
In other words, says Hilary Shelton, director of NAACP's Washington DC Bureau, whole minority communities, not just individuals, are hurt when houses go under.
"The individual stories are heart-wrenching," she said.
"Part of the American dream is being able to have a safe secure home where you can raise your family.
"But if we go beyond that and see how it affects entire groups... we know there is a racial factor."
Despite the foreclosure notice on his house, Mr Clavon still owns it. He would like to sell, but can't find a buyer.
"The facts are there. So-called minorities are disproportionately represented in these loans," he said about subprime lending.
"You can make out of that what you will."
- REUTERS