April 20, 2004 -- A far greater share of black and Hispanic homeowners with above-average incomes still have mortgages with higher interest rates than whites with comparable incomes, according to a study to be released today. The research suggests that conventional banks, despite recent progress, have failed to reach many minority borrowers who would qualify for good mortgages based on their salary and credit history, housing experts said.

In its most surprising finding, the study said that the racial disparities increased as homeowners' salaries rose. Among households that made at least 120 percent of the typical income in their metropolitan area, 32 percent of blacks held high-interest, or subprime, loans while only 11 percent of whites did. Among households that made 80 percent or less of the typical local salary, 56 percent of blacks had subprime loans and 25 percent of whites did.

"The market isn't working as it should," said Allen J. Fishbein, general counsel at the Center for Community Change, a housing advocacy group in Washington that conducted the study. "It's pretty striking."

The study looked at federal records of refinancing loans made in 2000. Such loans are most popular among subprime lenders, many of which are more willing to lend money to people who already own a house that can be used as collateral.

The center is releasing the study in an effort to promote a bill that Senator Paul S. Sarbanes, Democrat of Maryland, plans to introduce today in an effort to crack down on so-called predatory lending. The measure would expand the government's definition of high-cost loans and curb some features of these loans, like penalties against borrowers who pay off their mortgages early.

A number of state legislatures, including New Jersey's, are considering other bills aimed at predatory lending. California and North Carolina recently passed such bills.

But many lenders — including Fannie Mae and Freddie Mac, which package billions of dollars worth of home mortgages — oppose the state measures, arguing that they would prevent people who do not have low incomes or blemished credit histories from obtaining loans, or say the legislation should be modified.

Traditional banks have recently expanded their efforts to lend money in minority neighborhoods, partly in response to federal laws that give them incentives to do so and partly in an attempt to find new customers. But many of these neighborhoods are still dominated by mortgage brokers offering subprime loans.

The growth of subprime lending in recent years has helped many people who could not otherwise borrow money to buy homes, but it has also allowed predatory loans to become more common.

St. Louis had the biggest disparity between the percentage of upper-income blacks and upper-income whites who held subprime loans, according to the study. About one of every 20 affluent whites who took out a second mortgage in 2000 received a subprime loan. For blacks, the comparable figures were one in three.

Subprime loans typically have an annual interest rate one to four percentage points higher than a conventional loan. Over the life of a mortgage, the difference often translates into tens of thousands of dollars.

St. Louis was followed by Chicago, San Francisco, New Orleans and Indianapolis. New York ranked 24th out of 331 metropolitan areas.

The disparity between Hispanics and non-Hispanic whites was greatest in Western cities with large Spanish-speaking populations. These include Tucson, Ariz., and Salinas, San Francisco and San Jose in California. New York ranked 13th.

The study's authors acknowledged that their findings did not prove that minority borrowers unfairly pay high mortgage rates, because applicants' credit histories were not considered. But the authors said the gaps between subprime lending to whites and minority borrowers were probably too big to reflect only credit differences. Some other housing experts, told of the findings, agreed. "On the surface, it sounds right," said Jeffrey Zeltzer, executive director of the National Home Equity Mortgage Association, which represents subprime lenders. For years, many banks denied credit to minority borrowers, Mr. Zeltzer said, and some people continue to borrow from subprime lenders, out of habit or fear that banks will reject them.

Housing experts said they could not fully explain why the gap between whites and minorities grew as income rose. One possibility is that banks discriminate against minorities, rejecting them for loans that whites with similar income and credit history receive. Bankers strongly deny that, and Mr. Fishbein, one of the study's authors, said researchers found no evidence to the contrary.

Mr. Fishbein said another possible explanation is that subprime lending is concentrated in minority neighborhoods. Minority applicants with high incomes who live in these neighborhoods might borrow from subprime lenders after seeing their ads and storefronts much more often than those of traditional banks.

Douglas Duncan, chief economist of the Mortgage Bankers Association of America, said the significant rise in minority income in the last five years could also have played a role. Minorities' income may have effectively leaped ahead of their credit quality, which suffered during years when they made less money, giving banks a reason to reject their applications.