PAUL SCHRAG: ARMED TO THE TEETH >>>

Sorry to keep doing this. But we’re screwed â€" especially homeowners with adjustable-rate mortgages in the South Sound. At least that’s what’s indicated in a report issued recently by the Washington Budget and Policy Center. The report, titled The High Cost of Subprime Lending in Washington State, suggests that this damn mortgage crisis could actually get worse, and that its effects will fall particularly hard on poor and minority communities. At one time believed to be slightly insulated from the mortgage woes troubling other states, Washington is expected to see rates increase on a flood of adjustable-rate mortgages this year, and those mortgages will have higher rates of prepayment penalties than nearly any other state in the nation. Translation â€" people who couldn’t get their hands on a standard loan and opted for a risky, adjustable-rate mortgage will see increases that many simply won’t be able to afford. During the coming year, it is expected that interest rates will reset on 23 percent of adjustable rate mortgages in Washington. That’s a higher share than nearly every other state.

The likelihood of a spike in foreclosure rates is profound, especially in Pierce County, which posted the highest foreclosure rate in the state earlier this year. Foreclosures in Pierce County more than doubled in 2008 â€" from 3,088 in 2007 to 6,669 in 2008, according to foreclosure listing service RealtyTrac.

“Many families who are already struggling during this recession will also face unaffordable increases in their mortgage payments in the next couple years,” says Jeff Chapman, author of the report. “The state must consider ways to boost federal efforts to ensure that people can pay fair prices and stay in their homes.”

What’s more interesting is data that suggests minorities and people from low-income neighborhoods are paying more for mortgages. Analysis of data from the Federal Reserve suggested that the income level of the neighborhood where the home is located played an important role in loan pricing. Mortgages in lower-income neighborhoods were almost twice as likely to be high cost. In Pierce County, 44 percent of high cost mortgages were sold to the lowest income neighborhoods, compared to 24 percent in higher-income neighborhoods. What’s more alarming is data that shows African Americans and Latinos were more likely to have high cost loans regardless of their income level. More than 40 percent of mortgages lent to African Americans and Hispanics were high cost, compared to an estimated 22 percent for non-Hispanic whites and Asians. Among borrowers with high incomes, 37-39 percent of African American and Hispanic borrowers had high-cost loans, compared to 18 percent for whites. Even when using a mainstream lender, people of color were still much more likely than whites to pay higher costs for mortgages. The choice of lender does not fully account for disparities in mortgage pricing by race and ethnicity, according to study authors.

“What is especially troubling about the findings in this report is that it appears people of color with higher incomes are getting high-cost loans,” says Alexes Harris, assistant professor of sociology at the University of Washington.

So what does all this add up to? Washington Budget and Policy Center says it means we need to put pressure on legislators to improve education and regulation of subprime mortgages, and an aggressive approach to casting a safety net under thousands facing foreclosure this year.

“All consumers, regardless of their race, should have access to fairly priced goods and services,” says Dorry Elias-Garcia, Executive Director of the Minority Executive Director’s Coalition.

PHOTO: Flickr/Peternamara1