A national study documents rampant predatory lending activities directed against minorities and low-income mortgage consumers, but while government officials are taking steps to stem the tide, the report also says consumers must learn to protect their own interests.

"Separate and Unequal: Predatory Lending in America" by the Association of Community Organizations for Reform Now (ACORN) a non-profit national community organization of low- and moderate-income families says minorities and low-income home owners, more often than whites, are steered toward more expensive sub-prime loans, even when they could qualify for cheaper prime financing.

The study said 49.9 percent of all conventional refinance loans received by African-American home owners were from subprime lenders, compared to 26.2 percent received by Latino home owners, and 18.0 percent for white home owners.

African-Americans were 2.8 times more likely than white borrowers to receive a subprime loan. Latinos were 1.5 times more likely, the report said. The reports analyzed Year 2000 loan data for dozens of metropolitan areas, using purchase and refinance loan statistics released by the Federal Financial Institutions Examination Council (FFIEC). The study reviewed the lending activity of more than 7,800 institutions covered by the Home Mortgage Disclosure Act (HMDA).

Subprime loans carry higher rates and fees than prime loans because borrowers are regarded as less credit-worthy and representative of greater risk. When such loans also come with exorbitantly high costs, penalties and other financially abusive features, the loans are deemed "predatory." Not all subprime loans are predatory, and most of them help borrowers qualify when they might not otherwise, but predatory loans generally are subprime, ACORN says.

Some states and fewer cities have passed anti-predatory loan laws and federal legislators are working on a national mandate, but ACORN's "Separate and Unequal," says while consumers wait for more regulatory support they can take steps to protect themselves.

ACORN suggests:

• Before beginning loan shopping get mortgage counseling. Local housing departments, community groups, faith-based organizations and others not affiliated with lenders, either have such programs or can point you to independent counseling centers staffed by experts who can evaluate your financial situation and discuss your loan needs. Call ACORN in San Jose at (408) 293-1520, e-mail ACORN at caacornsjr@acorn.org or call the U.S. Department of Housing and Urban Development at (888) 466-3487 for help locating a counselor.

  If you are already in the middle of the loan process, talk to the counselor to evaluate any loan offers you are receiving. You may qualify for a cheaper loan.

• Ignore high-pressure tactics. Before you sign anything, take the time to have an expert such as a housing counselor or attorney look over the purchase agreement, offer and any related documents. Remember, buying a home is likely the largest transaction you'll ever complete.

• Don't agree to or sign anything that doesn't seem quite right even if the broker or lender tells you that "it is the only way to get the loan through" or "that's the way it's done," without a satisfactory explanation. Look over everything you sign to make sure all your information is correct, including your income, debts, and credit. Do not sign blank loan documents or documents with blank spaces "to be filled out later."

• Before closing your loan, get a copy of your loan papers with the final loan terms and conditions so you have enough time to examine them. Tell the title, escrow company, lender or any others who will be present at the signing that you will need ample time to read over all the documents and that you do not wish to be rushed. If anything is dramatically different at closing, don't sign it.

• Don't accept a lender's statement that you have bad credit without reviewing your credit report yourself for mistakes and inaccuracies and having an independent person evaluate your credit.

• In an equity loan, refinance that includes a first and a second mortgage or other debts to be paid with the proceeds, know exactly what debts will and will not be paid and if your new payment will include taxes and insurance, private mortgage insurance and any other on going costs. You should understand if the payment being quoted is sufficient to pay off a loan or only goes toward the interest.

• Be wary of any lender or broker who encourages you to refinance your first mortgage, add more debts onto the loan or otherwise offer financing for needs you did not voice. Avoid borrowing more than the value of your home. Owing more than your house is worth can prevent you from selling your house or refinancing at a better rate at a later date.

• Be ware of high points (each point is one percent of the total loan amount) and fees. Loans typically cost 1 to 3 percent of the loan amount for points and fees to the lender. If you are being charged more, find out why and shop around.

• Avoid single-premium credit life or credit disability insurance designed to pay your mortgage if you die or are injured. The insurance is of little value and is often a tool of predatory lenders.

• Avoid prepayment penalties. Many subprime loans come with prepayment penalties you must pay if you refinance your loan or sell your home within the first few years of your mortgage. If you accept the clause, be sure you know the terms -- how long it is in effect, and how much it will cost. If you believe you will refinance within the prepayment term, get a loan without a prepayment penalty.

• Avoid balloon payments. Balloon mortgages have the payments structured so that after making all your monthly payments for several years, you still have to make one big "balloon payment" that can be as much as your original loan amount. If at the time the balloon is due, you can't make the payment or refinance, you could lose your home.

• Predatory lenders like to include mandatory arbitration clauses in the contracts. If you sign it you will give up your right to sue should something go wrong.

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