More Evidence Lenders Were Bad Guys
I can’t remember what I did yesterday. But I can recall a scenario in which the Clinton administration and in its early stages the Bush White House promoting home ownership for all Americans.
Clinton got his folks in Congress to soften lending standards at Fannie Mae and Freddie Mac. A housing market bubble ballooned for several years, aided by Bush’s penchant for deregulation.
While everyone enjoyed the good times, the housing bubble burst as we now know because of subprime loans, default derivatives and other exotic financial leveraging devices.
Immediately, finger pointing began, led by the right-wing Bush apologists. The two main targets were Rep. Barney Frank of the House Financial Services Committee and Sen. Chris Dodd of the Senate Finance Committee for their close association with Fannie and Freddie.
But among the outcry from the more extremist critics were racial slurs that many new Hispanic and African-American homeowners had no business owning property they couldn’t afford and were the direct cause of the market collapse.
Of course, there was an element of truth on what the critics charged with little regard for all the facts.
Today we learn from the Pew Hispanic Research Center that the gains in home ownership since 1994 among minorities has reversed but not nearly as much as one would expect.
In fact, foreign-born Latinos, whose rate of home ownership, while low, has stalled in the downturn but not fallen.
Since 2004, home ownership for all Americans has declined to 67.8 percent from 69 percent. For African Americans it fell to 47.5 percent from 49.4 percent. Latinos had a longer period of growth, with home ownership rising until 2006, to 49.8 percent, before falling to 48.9 percent last year. Home ownership for native-born Latinos fell to 53.6 percent from a high of 56.2 percent in 2005.
For all immigrants, home ownership fell minimally, to 52.9 percent from 53.3 percent in 2006. Latino immigrants, who have the lowest rates of home ownership among the groups studied, did not lose any ground, remaining at the high of 44.7 percent that they reached in 2007.
The gaps between whites and minorities remain significant, with home ownership rates for Asians (59.1 percent), blacks (47.5 percent) and Latinos (48.9 percent) well below that for whites (74.9 percent).
Like previous studies, the report found that blacks and Hispanics were more than twice as likely to have subprime mortgages as white homeowners, even among borrowers with comparable incomes. Only 10.5 percent of white home buyers took out high-cost loans in 2007, compared to 27.6 percent of Latinos and 33.5 percent of African Americans. These loans, which typically require little or no down payments and are meant for borrowers with low credit scores, made home ownership possible for many black and Hispanic families during the boom years, but also led to high rates of foreclosure.
“Basically that gap was closed on poor loans that never should have been made and wound up harming folks and their neighborhoods,” said Kevin Stein, associate director of the California Reinvestment Coalition, an organization of nonprofit housing groups.
African Americans and Latinos remain more likely than whites to be turned down for mortgages, with 26.7 percent of applications from Hispanics being rejected in 2007; 30.4 percent for blacks; and 12.1 percent for whites. These disparities held even for borrowers whose incomes were well above average for their area.
Though there are no data on the race or ethnicity of homeowners in foreclosure, the researchers found that counties with high concentrations of immigrants had high rates of foreclosure. This association was even stronger than that between the prevalence of subprime mortgages and the foreclosure rate.
But the research did not suggest that high rates of immigration cause high levels of foreclosure on their own, said Rakesh Kochhar, associate director of research for the Pew Hispanic Center. High unemployment, falling house prices, subprime loans and high ratios of debt to income all contributed to high foreclosure rates.
This is a lot of statistics thrown at us and one can twist them any which way.
It is apparent in my mind that predator lenders duped the low-income minorities into the home ownership dream by offering them something for nothing. Too good to be true. And, it was. The predators took the money and ran leaving the rest of us folks holding the bag.
Was the black janitor or Mexican farm laborer being responsible? No.
On the flip side, the lender who negotiated the loans was a criminal predator.
Don’t blame the guy with the dream.
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