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Today's Date: April 19, 2024
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BLACK HOMEOWNERS' DILEMMA
FORT WORTH -The subprime mortgage meltdown and resulting recession is far from
over, particularly in the African American community. According to the Center For
Responsible Lending (CRL), 11% of African Americans have already lost their homes, or are
in imminent danger of losing their homes, and it is projected that between 2009 and 2012,
$193 billion in wealth will be lost in the African American community.
As a result of these and other devastating affects of the mortgage crisis on the African
American community, The National Association of Real Estate Brokers® (NAREB) has
developed an Issues Paper entitled, “Affordable and Sustainable Homeownership for African-
Americans and Other Minorities: 2010 and Beyond.
ComplianceTech presented key research findings, while NAREB highlighted the urgency
to do more to protect the African American community during the mortgage crisis.
The presentation of the Legislative Breakfast is a key part of the 63rd Annual National Association of Real
Estate Brokers Convention, which was held at the Renaissance Worthington Hotel, July 29th
through August 5th (200 Main Street, Fort Worth, Texas). The Convention theme was
“REALTISTS® …Restoring and Serving Our Communities with Integrity, Trust and Truth,” and
focused on innovative approaches and cross-sector strategies that work to rebuild confidence
in the nation’s housing market, and at the same time, protect financially-distressed
homeowners, in what has been called the worst financial crisis since the Great Depression.
The NAREB Issues Paper reflects NAREB’s “on the ground” perspective and makes the
case for an integrated public policy approach. Taken together, the recommendations are
designed to foster hope among distressed minority homeowners, re-instill confidence among
minority homebuyers, increase minority participation in recovery efforts, and to rebuild
distressed communities, nationwide.
NAREB President, Vincent Wimbish was very passionate about the disproportionate
affect that the mortgage crisis has had on the African American community. “What America
has not done is tell the truth about the crisis,” he said. “Since 2007, when all of this started,
almost 3 million foreclosures have happened and our communities were targeted the most,
from a subprime lending and refinance standpoint,” he noted. Subprime lending is a practice
of making a loan at a higher interest rate than most other loans. These loans are made
available, typically, to people who do not qualify for standard loans at lower rates, often times
because of poor credit history. According to Paul Taylor, Jr., President of SRP Development,
research shows that the majority of subprime loans have been made to non-hispanic whites in
predominantly middle class communities. “Unfortunately, a large number of subprime loans
were made to African Americans who qualified for standard prime loans.” So, they targeted
minority communities, in particular.” “We were bamboozled by Wall Street,” said Wimbish.
“56% of the foreclosures are not in our community, but we feel the effects a lot more because
most of the loans we received were subprime loans.”
The foreclosures happening nationwide are having a ripple effect on the overall
mortgage industry. “The majority of sales in minority communities are REOs (Real Estate
Owned), which means that they are owned by a bank,” said Wimbish. “This, in turn, means
that the values of the homes have decreased, so it is difficult to move owner/occupancy
homes. In the end, this means less consumer expenditures, investment opportunities and less
money circulating in the African American community. So this is a call-to-action. Between
NAREB, legislators and the business community, we must advocate that new mortgage
products are created. We need products that are not solely determined by credit scores. We
must do away with using predictable financial behavior as the primary tool to qualify
homebuyers. The system needs to be income-based, with an agreement for an automatic
deduction out of their paychecks, and require modest down payments with 3-6% seller
concessions. And consumer counseling has to be a major part of the process. As you counsel
customers, credit scores will rise,” he said.
Maurice Jourdain-Earl, Founder and Managing Director, ComplianceTech, has been
analyzing data on minorities and the mortgage industry since 1990. “While it is true that loose
underwriting by lenders provided unsustainable loans and subprime loans, there is also some
consumer irresponsibility,” said Jourdain-Earl. “But the perception, especially in the press, is
that African Americans and Hispanics have caused most of the fall-out because they were
taking out loans they could not afford. And this simply is not true. The majority of subprime
rate loans were made to whites and middle and upper income consumers, and in
predominately white communities – those with less than 30% of minorities. Wall Street
played a huge role in this house of cards. And even though the train stopped, the
caboose kept going, and in the process, many borrowers of color, in particular, were hurt. So
the bottom line is, it’s vital that this Call-to-Action be put in place,” he said.
Cicero Wilson, Vice President of SRP Development quoted the Center for Responsible
Lending report saying, “10-13 million foreclosures will occur before this foreclosure crisis
abates. With banks adopting higher down payments and higher credit scores, we will not be
able to sell properties in African American communities to these communities. Eventually,
these communities will be boarded up for years. For example, say that you have 500 homes
in one community. 100 become foreclosures. 200 homes eventually get boarded up. Well,
what happens to the 200 people who continue to pay their mortgages on time? Their property
values decrease. Crime increases in the community. There’s no resell or refinance
opportunity because of the decreasing property values. So we must prevent more people
from being foreclosed on and losing their homes. We’re at a tipping point. We have to bring
back buyers for properties so that they can be put back on the market. If you don’t reverse
this trend, we end up with a ghost town. This is particularly true for historically African
American communities. In order to preserve these areas, we need African American buyers
who will help rebuild those communities. The U.S. Treasury, nor HUD, have released these
statistics. The only ones truly looking at the statistics on African Americans that have lost
homes to foreclosure are NAREB and their partners,” he said.
“What you see today is the beginning of a fight,” said Lawrence Batiste, Chairman of
the Board for NAREB.” “So, it’s time to mobilize your local boards,” said Wimbish. We will
roll this out, first in L.A. We will be offering appraisal training. We have affiliates who can do
all of the grunt work. Once we stop foreclosures, the value of the properties will come back,
and we will be able to save our communities.”
NAREB has a vast network of industry professionals ready to answer the call-to-action,
including brokers and sales agents; pre and post counseling, loss mitigation and foreclosure
experts; appraisers; property management, housing construction and development experts;
and mortgage brokers/loan officers. “But we must also further engage, energize and hold
accountable, elected officials and policy makers all over the country so that we may shape
legislation and develop programs that will offer the real solution to the mortgage crisis -
preserve, revitalize and stabilize homeownership in African American communities,” says
Wimbish.
The National Association of Real Estate Brokers (NAREB) was formed in 1947 out of a need
to secure the right to equal housing opportunities regardless of race, creed, or color. Since
its inception, NAREB has instigated, participated in, or actively supported legislative
initiatives and legal challenges to ensure fair housing for all Americans and access to
business opportunity for minority real estate professionals. Today, NAREB has 88 chapters
located nationwide.
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