April 5 (Bloomberg) -- A coalition of U.S. civil rights groups asked mortgage lenders to freeze foreclosures for borrowers with weak credit ratings, saying ``reckless'' lending practices to minorities caused their predicament.

Lenders, loan servicers and investors in mortgages should agree to a six-month foreclosure moratorium, said a group including the National Association for the Advancement of Colored People, the National Council of La Raza and the National Fair Housing Alliance in a joint statement yesterday.

Political pressure on the government and regulators to intervene has increased as defaults on subprime loans rose to a four-year high and foreclosures on all home loans rose to a record in the last quarter of 2006. As many as 2.4 million Americans may lose their homes because of the collapse of the subprime loan industry, said the Center for Responsible Lending, also part of the coalition, in testimony to Congress last month.

``These loans are packaged and sold by Wall Street to investors who knew or should have known that these loans had a higher likelihood of default,'' said Shanna Smith, president of the National Fair Housing Alliance. ``Now Wall Street is willing to just let the `market adjust,' the `market stabilize,' but at whose expense?''

The groups said black and Latino borrowers received a disproportionate share of subprime mortgages -- those made to people with lower credit scores or high debt burdens. Some 52 percent of black borrowers and 40 percent of Latino home owners have a subprime loan, compared with 19 percent for whites, the groups said in statements posted on the Alliance's Web site.

Adjustable Rates

Many subprime mortgages offer low introductory rates, helping people with low credit or little cash to buy homes. As introductory rates expired and home prices rose more slowly, many borrowers found they couldn't afford to make payments at the new rate. Subprime loans typically adjust to rates 2 or 3 percentage points above prime loans, such as conventional 30-year fixed-rate mortgages granted to buyers with strong repayment records.

House Financial Services Committee Chairman Barney Frank has said he wants legislation by the end of the year to set a national standard for banks and mortgage brokers and to keep borrowers from loans they can't afford.

In an interview today, Frank said he supported the general moratorium idea though he had to study it further. While lenders could voluntarily institute a freeze, it wouldn't be possible to ``legally enforce it,'' he said.

``What would you do in the interim?'' Frank said in Norton, Massachusetts. ``If you had something you were doing in the interim, if there was some hope, some instrument you can do, that would be useful.''

Existing Bans

Ohio Attorney General Marc Dann last month persuaded New Century Financial Corp., the now-bankrupt subprime lender, to halt foreclosures until their legality could be established. Fannie Mae, the biggest source of mortgage money in the U.S., on March 29 extended through the end of this year its ban on foreclosures without written approval in parts of Louisiana and Mississippi devastated by Hurricanes Katrina and Rita.

According to the Mortgage Bankers Association, subprime loans rose to 20 percent of new mortgages last year from 5 percent in 2001, and 13.3 percent of subprime borrowers were late on payments.

``Forbearance is certainly an effective tool in some cases, but it is not a sustainable long-term solution,'' said John Robbins, chairman of the Washington-based trade group, in a statement issued yesterday. ``Blanket policies rarely have the desired blanket effects. Each loan is an individual transaction and situation, one which needs to be addressed individually between the lender and the borrower.''

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.

Last Updated: April 5, 2007 13:54 EDT