Foreclosure: The Crisis That Hits Home

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Foreclosure The Crisis That Hits Home 

• 2009 Washington State
• Access to Justice Conference
• Justice Hope and Help in Hard Times
• john a. powell
• Executive Director, The Kirwan Institute for the
  Study of Race Ethnicity and Williams Chair in
  Civil Rights Civil Liberties, Moritz College of
  Law

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The State of Washington
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(No Transcript)
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The Foreclosure Crisis

• Communities of color and low-income communities
  were physically, socially and economically
  segregated from prime credit markets

• People in these communities were subject to
  sub-par lending from rent-to-own to payday
  lenders to check cashing places that all charged
  exorbitant interest rates
• And finallysubprime home loans

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Foreclosures

• Nearly half of all subprime loans went to African
  American and Latino borrowers --- even though
  many qualified for prime loans
• African American and Latino homeowners are
  expected to lose between 164 - 213 BILLION in
  assets due to the crisis

United for a Fair Economy, Foreclosed State of
the Dream 2008
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The Impact of Concentrated Foreclosures in a
neighborhood

• Foreclosures pull wealth/equity and assets out of
  the neighborhood
• Individuals strip personal savings (i.e. raid
  their 401(K)s to try and save the home
• Widespread displacement which disrupts the
  neighborhoods social fabric and creates
  instability for children
• The growth of vacant property encourages crime,
  disinvestment and public safety risks
• Challenges which eventually ensnare all
  neighborhood residents

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Reverse Redlining

• Reverse Redlining practice of targeting
  residents in certain geographic areas for credit
  on unfair terms due to the racial or ethnic
  composition of the area.
• Unlike redlining, which is denying prime credit
  to those communities, reverse redlining is
  targeting an area for deceptive, predatory, or
  otherwise unfair lending practices. Reverse
  redlining has repeatedly been held to violate the
  Fair Housing Act.
• Reverse redlining requires the condition of
  residential segregation, often a product of
  twentieth century federal government, mortgage
  lender, and real estate industry practices.

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Ex Baltimore

• In Baltimore, the neighborhoods with 90 African
  American populations are at the center of the
  foreclosure crisis. This was a result of
  predatory practices.
• Two-Thirds of Wells Fargos foreclosures in 2005
  to 2006 were in census tracts that were over 60
  African-American, but only 15.6 were in tracts
  that were 20 or less African-American.
• Wells-Fargo loans in predominantly
  African-American neighborhood were four times as
  likely to result in foreclosures as a Wells Fargo
  loan in a predominantly white neighborhood.
• Wells-Fargo made high-cost loans to 65 of its
  African-American mortgage customers in Baltimore,
  but only to 15 of its white customers in
  Baltimore.
• An African-American borrower was 2.5 times more
  likely to be subject to a high cost refinance
  loan than a white borrower.

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Baltimore Foreclosure Race/Income
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Ex Institutionalized Disinvestment Redlining
Map of Philadelphia
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From Redlining to Reverse Redlining in
Philadelphia
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Connecticut
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Columbus, OH
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Housing is Most of Our Net Worth
In 2000, home equity accounted for 75 of the
assets held by the median U.S. household
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African American homeownership gains were
reversed after 2004 they have reverted to 2000
levels.
Austin, Algernon. Reversal of Fortune. EPI
Briefing Paper 220 18 Sept. 2008.
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The Miners Canary

• Nationwide, nearly 55 of all high cost loans
  went to African American borrowers
• Experts estimate that the loss in home equity to
  African American and Latino homeowners will
  exceed a quarter of trillion dollars
• Direct asset loss (foreclosure) and loss in home
  value due to the geographic concentration of
  foreclosures in minority neighborhoods

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Capital Market Credit crunch
Banks, police and courts saddled with foreclosures
Families lose their homes, wealth and safety
SUBPRIME LENDING We didnt care about the
canary...
Affected neighborhoods are being reduced to
ghost towns
Reduced spending and retail flight
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An Uneven Recession

• Since the recession began in December 2007
• Latino unemployment up 4.7 percentage points, to
  10.9 percent
• Black unemployment up 4.5 points, to 13.4 percent
• Between November 2007 and March 2009, black men
  experienced the highest rate of job loss among
  any gender or racial/ethnic group.
• White unemployment up 2.9 points, to 7.3 percent

Bureau of Labor Statistics http//www.msnbc.ms
n.com/id/29843053 Marlow, Ron, and Andrew Sum.
A Job Crisis for Young Black Men. The Boston
Globe 22 Apr 2009.
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The black-white median income ratio has dropped
below 1995 levels.
Austin, Algernon. What a Recession Means for
Black America. EPI Issue Brief 241. 18 Jan.
2008.