Nation reports on Atlanta mortgage crisis’ dismal impact on African-Americans
July 1, 2008 at 12:22 pm by John F. Sugg in NewsA Nation investigative report focuses almost entirely on the loss of black wealth in Atlanta due to unscrupulous tactics by lenders and their vassals at the Gold Dome. The article states:
Nearly 18,000 homes faced foreclosure in the Atlanta area during the first quarter of 2008, an almost 40 percent jump from the first quarter of 2007. In Fulton County, which encompasses most of the city’s core and is heavily African-American, one in 122 homes was in foreclosure in the first week of April. …
… for black America, the “mortgage meltdown” looks less like a market hiccup than a massive strip mining of hard-won wealth, a devastating loss that will betray the promise of class mobility for tens of thousands of black families. As the mortgage crisis unfolded, observers of all political stripes repeated a boilerplate line: the “affordability products” that have flooded the lending market in recent years — from subprime to interest-only loans — have done more good than bad by fueling a surge in black and Latino homeownership. But while minority homeownership may have grown in the short term, the long-term outlook promises quite the opposite, as southwest Atlanta painfully illustrates.
First-time homebuyers have originated less than a tenth of all subprime loans since 1998, according to a 2007 Center for Responsible Lending analysis. As recently as 2006, just over half of all subprime loans were refinances of existing home loans. The expected foreclosure toll from these loans will outpace the ownership gains by nearly a million families, the center estimates.
That’s particularly true in established black neighborhoods like Westwood, where banks and brokers targeted vulnerable longtime homeowners and lured them into needless and rapidly recurring mortgages they clearly couldn’t afford and from which they never stood to gain. More than half of all refinance loans made to African-Americans in 2006 were subprime, according to an analysis by the advocacy group ACORN. That’s nearly twice the rate among white borrowers. Among low-income black borrowers, 62 percent of refinance loans were subprime, more than twice the rate among low-income whites.
“It actually started in communities like Atlanta,” says Nikitra Bailey, a Center for Responsible Lending researcher who has studied the Southeastern US housing crisis. “A lot of our older African-Americans were house rich but cash poor. So lenders came up with these scams to siphon the wealth away.”
It’s a loss black America can scarcely afford, because black wealth has long been enormously dependent on home equity. In 1967, the year before the Mitchells bought their house, homes accounted for 67 percent of black wealth, compared with 40 percent of white wealth. The disparity has only grown, pushed by the turn-of-the-millennium stock market boom. Without counting home equity, black net worth in 2004 was just 1 percent of that for whites, according to research by New York University economics professor Edward Wolff.
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July 2nd, 2008 at 12:03 pm
This is almost as harmful to wealth building for black people as Social Security.