Tuesday, June 22, 2010

Latino/as, African Americans Hit Hardest by Housing Crisis

Latino/as, African Americans Hit Hardest by Housing Crisis

New study shows that the foreclosure rates have not subsided amid reports of recovery

By Abayomi Azikiwe
Editor, Pan-African News Wire

Despite claims of an economic recovery by the Obama administration and the corporate media, the crisis in home foreclosures-- which was instrumental in triggering the financial meltdown of 2008-- still remains a major problem for Latino/as and African Americans. A recently released study by the Center for Responsible Lending indicates that the rate of home foreclosures are nearly twice as high for the largest nationally oppressed groups in the United States than for whites.

In early 2007, housing prices began to decline rapidly even though the interest rates and penalties paid on mortgages rose sharply. During the so-called real estate boom of the 1990s and the first years of the 2000s, Latino/as and African Americans were targeted with predatory lending schemes that proved to be disastrous for both communities throughout the United States.

Many of the borrowers were first-time homeowners and others, who already had mortgages or homes that were “free and in the clear”, fell prey to real estate brokers and unlicensed salespersons who told them that housing pricing would continue to appreciate and that they should purchase and refinance. The impact has been devastating on nationally oppressed families and neighborhoods and for the working class as a whole.

In fact the full magnitude of the problem has not been fully assessed due to the lack of data on the housing problem and the refusal of both the financial industry and the federal government to provide an accurate assessment of the situation. Consequently, the data that is available can only be considered cautiously since the total magnitude of the crisis is still being revealed to the public.

In the report by the Center for Responsible Lending, entitled “Foreclosures by Race and Ethnicity: The Demographics of a Crisis,” it states that “Although a number of useful mortgage databases are available, there is no official, nationwide, publicly available census of completed foreclosures or associated demographic information. In this report we seek to shed light on the nation’s foreclosures crisis by using government and industry data to estimate the number of foreclosures in recent years and their impact by race and ethnicity.” (Executive Summary)

The Center for Responsible Lending says that “During the first three years of the foreclosure crisis, from January 2007 through the end of 2009, we estimate that 2.5 million foreclosures were completed. The vast majority of these foreclosures were on owner-occupied properties with mortgages that were originated between 2005 and 2008.”

Based upon the data that is available, the Center for Responsible Lending reports that “The majority (an estimated 56%) of families who lost homes were non-Hispanic and white, but African American and Latino/as families were disproportionately affected relative to their share of mortgage originations.”

The report goes on further to state that “Among recent borrowers, we estimate that nearly 8% of both African Americans and Latino/as have lost their homes to foreclosures, compared to 4.5% of whites. The racial and ethnic disparities in these estimated foreclosures rates hold even after controlling for differences in income patterns between demographic groups.”

Even with these extremely high numbers of home losses, the crisis is far from over. The Mortgage Bankers Association’s National Delinquency Survey (NDS) reported that the rate of foreclosures still remains at 4.63%, which is nearly 500% higher than the figures from 1979 until 2006.

If the number of households who are two or more mortgage payments behind is added to the foreclosure figures, the Center for Responsible Lending estimates that 5.7 million households are in serious risk of losing their homes. Looking toward the future, the same report envisions anywhere between 10 and 13 million homes will be lost even if the current crisis in capitalism subsides.

With specific reference to the future, this same report says that “Non-Hispanic whites represent the majority of at-risk borrowers, but African American and Latino borrowers are more likely to be at imminent risk of foreclosure (21.6% and 21.4%, respectively) than non-Hispanic white borrowers (14.8%). American Indian (16.5%), Native Hawaiian or other Pacific Islanders (18.6%) and Asian borrowers (15.7%) all also show an increased likelihood of being at-risk.”

When the actual losses and imminent foreclosure risks are taken into account, the proportion of people who are impacted by the housing crisis will continue to grow at an alarming rate. The Center for Responsible Lending says that if the existing pattern continues at the same pace, 17% of Latino homeowners, 11% of African Americans and 7% of non-Hispanic white mortgage holders have loss and will lose their homes in the coming years.

This large-scale home loss will negatively impact the overall wealth of the African American and Latino/a communities. These families are already at an historical disadvantage in comparison to their white counterparts due to the legacy of slavery, national oppression and institutional discrimination in the United States.

The Center for Responsible Lending report says that “between 2009 and 2012, $193 and $180 billion, respectively, will have been drained from African American and Latino communities in these indirect ‘spillover’ losses alone. With millions of foreclosures still ahead, there is an urgent need for policymakers to take stronger actions to stabilize the housing market, keep families in their homes and prevent destructive lending practices in the future.”

A Case Study in Maryland

An example of the disproportionate rate of home foreclosures for African Americans is illustrated in Prince George’s County, Maryland which is near the nation’s capital of Washington, D.C. This county was described by the Center for Responsible Lending as the “Foreclosure Capital in the shadow of the nation’s capital,” where African American home losses have reached astronomical levels.

The case of Louise Golden is representative of the mortgage crisis that has affected African Americans throughout the country. Golden and her now-deceased husband purchased their home in Lanham, Maryland in 1980. This was a suburb outside of Washington where many African Americans had re-located during this time period.

When Golden’s husband became ill and the couple was swamped with medical bills, the husband refinanced the home. They initially thought the deal was good with a 30 year refinanced mortgage that started out at a reasonable monthly payment.

However, they later discovered that the interest on the mortgage was far too high and that the Adjustable Rate Mortgage (ARM) would periodically reset, driving the monthly payments way beyond their ability to pay. The husband died leaving Golden strapped with the huge monthly mortgage payments while the house continued to lose value every year.

According to the Center for Responsible Lending “Louise Golden is not alone. With a population that is 64% African American, Prince George’s County offers a case study of the unequal impact of the nation’s foreclosure crisis on communities of color. Prince George’s has become Maryland’s foreclosure capital, far and away recording more total foreclosures and a higher rate of foreclosure than any other jurisdiction in the state.”

This report continues by pointing that “In 2009, Prince George’s recorded 13,412 foreclosure filings—accounting for 31% of foreclosure filings in the state, even though the county has less than 14% of the housing units in the state. According to the Maryland Department of Housing and Community Development, one out of every 24 homes in the county was subject to a foreclosure filing last years, compared to a statewide rate of one out of 54.”

In part the high rate of loan default and foreclosures among people of color communities can be attributed to discriminatory lending practices where African Americans and Latino/as are charged higher rates of interests than whites irrespective of their credit histories. This disparity has held true even among higher income families from both of these communities.

The Need for a Moratorium on Foreclosures in the U.S.

In the state of Michigan the Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shut-offs has waged a campaign for the last two years to force the state government to impose a halt to home seizures. Even though the demand is rooted within U.S. case law and is more than required due to the large-scale home losses in the state, Gov. Granholm and the state legislature has refused to take any meaningful action to prevent people from being thrown out of their homes which has resulted in the destruction of neighborhoods throughout the metropolitan and rural areas of the state.

The high rate of foreclosures in Michigan has caused the decline in tax revenues which has impacted public service, education funding and the overall value of homes. This has largely been the pattern throughout the U.S. where the banks and insurance companies act with impunity because they know that the federal government and the state legislatures will do nothing about the problem.

Until a mass movement is built across the U.S. that is led by the workers and the oppressed, the problem of home foreclosures will continue. The politicians in general work for the banks, insurance companies and other multi-national corporations against the will and needs of the working class and the oppressed.

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