By Beth Gorham

WASHINGTON (CP) - Elizabeth Redrick has lived in her Cleveland home for almost four decades. Now, suddenly, she may lose it.

Redrick, 77, took out a new mortgage two years ago hoping to lower her monthly costs and pay off a debt.

Instead, she was hit with thousands of dollars in fees and a mortgage payment that never went down, something she can't afford on a limited fixed income.

"I've been working far too long for this to happen," says Redrick, a retired housekeeper.

"This is a disgrace."

Stories like hers are all too common in a country reeling from a major housing slump and massive foreclosures that could affect millions of families.

Canadian finance officials worry the U.S. troubles could have an impact north of the border with falling demand for lumber and other materials.

But beyond the headlines is the ugly reality that African Americans, Latinos and other ethnic groups are by far the hardest hit in a crisis created by predatory lenders and so-called "subprime loans" that charge higher interest rates and fees for those with shaky credit ratings.

In Boston, for instance, blacks and Latinos were six to seven more times likely to have an expensive mortgage than whites in the same income bracket in 2005.

Women are also more likely than men to get subprime loans.

Redrick didn't realize when her troubles began that many neighbours in her predominantly black community are in the same boat or have already lost their homes.

More and more boards are going up on windows along streets in Cleveland, Chicago, Pittsburg and other U.S. cities in a terrible downturn that's disproportionately affecting non-whites.

What's even more heartbreaking, says Lisa Rice, vice-president of the National Fair Housing Alliance, is that up to half of them would have qualified for a regular loan. The alliance is dedicated to ending discrimination in housing across the United States.

It's a combination of limited mortgage sellers close to home and a lack of awareness, said Rice.

Blacks relegated to certain neighbourhoods during nearly a century of "separate but equal" status always had fewer options when it came to credit, Rice said.

They couldn't improve their situation because smaller lenders don't report payments that can alter credit scores and provide for lower interest rates.

And traditionally, they received less help than Caucasians when they have problems making payments.

The loan-denial rate for high-income African Americans is still higher than low-income whites, said Rice.

But now it's getting the wrong kind of loan that's causing all the problems.

When housing prices rose sharply in many parts of the United States in the boom of the last few years, some lenders used spotty underwriting to give people loans that they couldn't afford to pay back.

They built in fees and phoney charges never disclosed.

Or they offered interest-only mortgages and other exotic financial products with a disillusioning whammy down the road that would surprise Canadians used to a system far more streamlined and regulated.

Subprime or higher-rate loans, for instance, account for about 20 per cent of the U.S. mortgage market, compared with only five per cent in Canada.

"There's got to be a way where everybody gets on board behind sustainable loans," says Brad Blower at Relman and Dane, a law firm in the U.S. capital that specializes in fair lending cases.

That's more likely now that the foreclosure spike from non-traditional mortgages is threatening more prosperous white neighbourhoods too, catching the interest of legislators, said Rice.

"It should have gotten their attention a lot sooner."

Federal Reserve chairman Ben Bernanke has promised hearings on mortgage defaults in the coming weeks in a bid to crack down on abuses.

Blower predicts there will be a national bill this year aiming to define suitable loans and outline the fiduciary duties of lenders and brokers - who can easily channel people into questionable products and don't have to investigate whether a borrower can make the payments.

It can't come soon enough, said Allen Fishbein at the Consumer Federation of America.

The federation has been fighting for stronger protection for borrowers who aren't up to speed on the intricacies of an unregulated industry "that grew up like weeds between the concrete" in the last decade.

"It's like the Wild West now," Fishbein said. "It's a dramatic change from the way it used to work when you went to a bank and had to persuade them you're a good credit risk."

With some 250 different types of mortgages out there, it's so complicated that "even experts can't figure out the merits of the products side by side."

"There's no label on a lender's forehead that says I'm a subprime lender. For the average person, it's just another name," said Fishbein, the federation's director of housing and credit policy.

It's a crime, he said, that blacks and Latin Americans once shut out of the mortgage market are now finding themselves out on the street after finally getting what they thought was a piece of the American dream.

"I don't think we've seen that fully play out," he said. "We could see a serious reversal of the home ownership gains."

At a hearing on Capitol Hill, civil rights activist Jesse Jackson noted that subprime loans represented more than 50 per cent of all those taken out by African Americans in 2005 and 40 per cent of Latinos, compared with 19 per cent of white borrowers.

"Today's terms of credit for African American and Latino borrowers are un-American," he told legislators. "The cost of money for black and brown people is not based on equal opportunity, equal access or equal protection under the law."

But there's a good reason the abuses haven't been curbed, said Jon Goldin-Dubois, executive vice-president of Common Cause, a non-profit advocacy group.

"The fact is, the subprime mortgage lending industry was able to escape scrutiny for so long in part because of its generosity to federal policymakers and its lobbying clout."

A study released by the group last week noted that since 1999, 10 of the country's largest subprime mortgage lenders, their trade groups and their corporate parents, have contributed more than US$22 million to federal candidates.

Those special interests also spent more than US$187 million lobbying Washington over the same period.

"Despite warnings from consumer and low-income advocates as early as 2000, Congress turned a deaf ear to their request for stronger federal regulation," said the report.

"Seven years later, policymakers are confronting a full-blown crisis spurred at least in part from their inaction."

Now, with dozens of lenders going bankrupt and the median price for existing homes expected to drop for the first time since 1968, federal legislators are talking not only about new safeguards but a bailout of hundreds of millions to assist homeowners.

U.S. homes entering foreclosure doubled in the first quarter of 2007. Another wave may be coming. Some 1.8 million adjustable-rate mortgages are resettling to higher rates this year and next.

Last month, national civil rights groups called for a six-month moratorium for foreclosures on high-risk loans, arguing lenders should help borrowers refinance or face lawsuits.

Some banks have started programs for distressed homeowners.

And many grassroots groups are trying to help people stay in their homes.

For Redrick, at least, there may be some hope.

A local housing advocacy group in Cleveland has filed a discrimination complaint with the city and state on her behalf and other black residents whose homes are in foreclosure.

It complains that lenders have been targeting Redrick's ZIP code, which is 74 per cent black.

"I didn't go to college," she says. "I needed to get somebody to straighten this out."

Does she think she'll keep her house in the end?

"I don't know. But I sure hope so."