Housing crisis hits people of color hardest

Despite claims of an economic recovery by the Barack Obama administration and corporate media, the crisis in home foreclosures — which triggered the 2008 financial meltdown — still remains a major problem. A recently released study by the Center for Responsible Lending reports a 4.5 percent rate of home foreclosures for whites and rates nearly twice as high for African Americans and Latinos/as.

During the so-called real estate boom of 1990 to 2005, the largest nationally oppressed groups in the United States were targeted with predatory lending schemes that proved disastrous for both communities. In early 2007, housing prices began to decline rapidly as interest rates and penalties on mortgages rose sharply.

Many borrowers fell prey to real estate brokers and unlicensed salespersons who told them that housing prices would continue to appreciate and that they should purchase and/or refinance. The impact has been devastating for the working class as a whole, but especially so for nationally oppressed families and neighborhoods.

Both the financial industry and the federal government refuse to provide an accurate assessment of the situation. Consequently, the available data is questionable and the total magnitude of the crisis is still hidden.

The report by the Center for Responsible Lending, entitled “Foreclosures by Race and Ethnicity: The Demographics of a Crisis,” is the source of all quotes below.

“Although a number of useful mortgage databases are available,” it states, “there is no official, nationwide, publicly available census of completed foreclosures or associated demographic information.”

The report continues: “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 on owner-occupied properties with mortgages originated between 2005 and 2008.

Using the available data, the CRL estimates that 56 percent “of families who lost homes were non-Hispanic and white, but African American and Latino/a families were disproportionately affected relative to their share of mortgage originations ... 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 reported that the rate of foreclosures still remains at 4.63 percent, nearly six times the 1979 to 2006 average.

Including households where two or more mortgage payments are behind, the CRL estimates that 5.7 million households are at serious risk of losing their homes and in the future 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 percent and 21.4 percent, respectively) than non-Hispanic white borrowers (14.8 percent). American Indian (16.5 percent), Native Hawaiian or other Pacific Islanders (18.6 percent) and Asian borrowers (15.7 percent) 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 CRL estimates that 17 percent of Latinos/as, 11 percent of African Americans and 7 percent of white mortgage holders have lost or 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, already disadvantaged by the legacy of slavery, national oppression and institutional discrimination in the United States.

“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.”

The report described Prince George’s County, Md., a Washington suburb, as the “Foreclosure Capital in the shadow of the nation’s capital,” where African-American home losses have reached astronomical levels.

Louise Golden and her now-deceased spouse purchased their home in Lanham, Md., outside Washington in 1980, as many African Americans were re-locating there. When her spouse became ill, he was forced to refinance their home to pay medical bills. They initially thought the deal was good, with a 30-year refinanced mortgage that started out at a reasonable monthly payment.

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. Her spouse died, leaving Golden strapped with huge monthly mortgage payments while the house lost value every year.

“Louise Golden is not alone. With a population that is 64 percent 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,” totaling 13,412 foreclosure filings in 2009.

“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 year, 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 Latinos/as are charged higher rates of interest than whites, irrespective of their credit histories. This disparity has held true even among higher income families from both of these communities.

In 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 halt 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. Jennifer Granholm and the state legislature have refused to take any meaningful action to prevent people from being thrown out of their homes. This has destroyed neighborhoods throughout the state’s metropolitan and rural areas.

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

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. 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.