As part of the 43rd annual Congressional Black Caucus Foundation Conference, the National Association of Real Estate Brokers (NAREB) unveiled new and disturbing research on how communities of color are suffering a worsening racial economic disparity.
The “State of Housing in Black America” reveals that while the private sector and financially secure consumers recover financial ground from the Great Recession, much of Black America is being economically left behind.
Long-time civil rights activist Dr. Benjamin Chavis Jr., wrote:
“African-Americans have a large buying power, yet we continue to be the most foreclosed and wealth-depleted community in America. We cannot and will not just be bystanders as the American economy continues to rebound.”
Julius Cartwright, NAREB president added, “Not only has our homeownership rate plummeted, but also accessing mortgage credit has become nearly impossible.”
The report examines how African-Americans and Latinos have been cut off from the housing market and home finance in addition to employment opportunities. Until economic equity and recovery are added to the long-standing issue of equal access to housing, the ability for communities of color to build wealth will remain an elusive and distant dream.
For example, today the majority of mortgage loans made to African-Americans are FHA backed. Long-lured by FHA’s low down payment requirement (usually 3.5 percent), today’s costs for these loans have increased, particularly in the areas of mortgage insurance and fees. Consequently, although available, FHA loans will cost more over the life of the loans and they will also be higher than a decade ago.
By contrast, the report states that loans backed by Fannie Mae and Freddie Mac, “are all but impossible for many African-Americans to secure.” The typical credit scores of borrowers for these mortgages are in the upper 700 range with down payments at or near 20 percent and usually resulting in a more affordable monthly payment.
In the meantime according to the report, nearly five million borrowers remain either in the foreclosure process or are seriously delinquent on their mortgages. Between Jan. 1, 2007, and May 31, 2013, nearly 14.8 million foreclosure notices were filed. Since the onset of the crisis, African-Americans had 7.8 percent of mortgage originations, but 11.6 percent of completed foreclosures. The loss of homes to foreclosures is also lost family wealth. While African-American and Latino families respectively lost 53 and 66 percent of their net worth, non-Hispanic white households lost wealth was limited to 16 percent.
The report urges measurable progress before consumers of color can begin to financially recover:
Reducing the existing number of underwater mortgages through principal reduction.
More consumer mortgage purchase originations.
Easing of tight mortgage credit.
Reducing the growth of investor purchases that transform former owner-occupied dwellings into rental properties.
“Owning a home has been the most successful vehicle for people of color to build wealth,” observed James Carr, lead author for the report. “But with a tightening housing market and weak labor market and no exceptional programs to assist communities battered by the crises, the outlook does not look promising.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.
