Lenders’ race bias accounts for 40% more losses by people of color than by whites
by Christina Kasica, United for a Fair Economy
Boston – A new report says the subprime mortgage crisis will cause African-Americans to experience wealth losses of between $71 billion and $122 billion over its duration. The racial bias of subprime mortgage lenders accounts for a 40 percent difference in losses between whites and people of color.
This will mark the fifth year that United for a Fair Economy (UFE) has published a State of the Dream report on Jan. 15, the actual date of Dr. Martin Luther King’s birthday, which will be officially celebrated on Jan. 21. Read this year’s report, “Foreclosed: The State of the Dream 2008.”
“As we approach the 79th anniversary of the birth of Martin Luther King Jr., it’s important to realize how much ground middle- and working-class Americans have lost in the subprime crisis,” said Amaad Rivera, program leader for the Racial Wealth Divide team at UFE and a report co-author. “Our estimates indicate that it will cause the greatest loss of wealth for African-Americans in modern U.S. history.”
“The dream of economic stability and opportunity for everyone living in the U.S., so eloquently described by Martin Luther King Jr., is bound up with homeownership, the most significant source of wealth for most people,” said Dedrick Muhammad, senior organizer and research associate at the Institute for Policy Studies, a co-author of the report.
“As a result of cold-blooded targeting of people of color – and low-income people in general – by the subprime mortgage industry,” said Brenda Cotto-Escalera, co-executive director of UFE and a co-author of the report, “communities across the nation are being torn apart. As mortgages go into foreclosure, people move out, houses are boarded up, crime and fires increase, neighboring properties are devalued and the tax base erodes.”
The report details the types of subprime loans developed and offered by the industry since 1995, presents evidence of their effect on minority and low-income communities and outlines potential solutions.
United for a Fair Economy is a non-profit, non-partisan organization that spotlights the growing economic divide and works across races, ethnicities and classes to help shrink it. Visit them at www.faireconomy.org.
$4.6 M pledged to help stop foreclosures
A step toward a positive solution to the foreclosure crisis was unveiled Monday. The California Reinvestment Coalition (CRC) has partnered with eight financial institutions and two foundations to make possible a $4.6 million initiative that will increase the number of mortgage counselors in the state.
Mortgage counselors are often the only people borrowers trust when struggling to make payments on their home loans. The California Home Ownership Preservation Initiative will help mortgage counseling agencies meet the needs of troubled borrowers as the California foreclosure crisis worsens.
Counseling agencies report being overwhelmed by the 200 to 500 percent increase in homeowners walking through their doors in 2007. It is predicted that half a million California mortgage borrowers will struggle to make payments on their home loans in the next two years.