Foreclosures draining wealth from minority communities
This article first appeared in the St. Louis Beacon, June 18, 2010 - The foreclosure crisis continues to drain wealth from the nation's communities of color, both in direct financial loss and in declining property values, warns a report released today by the Center for Responsible Lending.
The nonprofit research group says that about 11 percent of African-American homeowners and 17 percent of Latino homeowners have either lost their homes to foreclosure or are at imminent risk of doing so. The report projects that, as foreclosures continue to climb, property values in communities of color will have dropped by more than $350 billion between 2009 and 2012. The center characterizes the loss as a "man-made disaster" that could eclipse the damage wrought by Hurricane Katrina.
The report came as no surprise to Eric Madkins, senior housing director for the Urban League of Metropolitan St. Louis, which provides free HUD-approved foreclosure counseling. He said the trouble started with predatory loans that were targeted at minority communities but has now grown into a deeper, broader problem: the overall economy.
"The biggest thing we're battling now is unemployment and declining wages," said Madkins whose office has six counselors working full time with financially troubled homeowners from throughout the St. Louis area.
Contributing to the housing disparity is the disparity of unemployment, he points out.
At 17.3 percent, the unemployment rate for African-Americans in the St. Louis area was the third highest in the nation in 2009, according to a recent report by the Economic Policy Institute. The rate was more than double the 8.4 percent unemployment rate for white St. Louisans.
"The foreclosure disparity is really a combination of sub-prime mortgages and unemployment,'' Madkins said.
The full report, "Foreclosures by Race and Ethnicity: The Demographics of a Crisis," is online.
According to the report:
- Using various databases, the center estimates that 2.5 million foreclosures were completed from 2007 -- when the foreclosure crisis started with the collapse of subprime mortgages -- through 2009. An estimated 5.7 million foreclosures are imminent.
- The center estimates that 56 percent of completed foreclosures involved white families. But the report says that, even when accounting for income, African-American and Hispanic families received a disproportionate share of foreclosures: Nearly 8 percent of Hispanics and African Americans have already lost a home, compared to 4.5 percent of white borrowers.
- The great majority of homes lost were owner-occupied.
"Whether we're talking about oil spills or housing catastrophes, it's clear that America needs to invest in prevention, clean-up and recovery," said Mike Calhoun, president of the center, in a news release. "As Congress finishes financial reform legislation, the rules on home lending need to get stronger, not weaker.''
The Center for Responsible Lending, a nonprofit organization, focuses on research and policies related to homeownership and family wealth.