The foreclosure crisis has hit blacks harder than any other group in America and it will be tough for them to regain their footing in the housing market.
Blacks’ homeownership rate has plummeted nearly 6 percent to 46.2 percent since its peak in 2004. That’s more than twice that of any other racial or ethnic group, as well as the nation’s rate as a whole, which fell only 2.3 percent, according to U.S. Census data.
Also, among recent borrowers, nearly 8 percent of blacks have lost their homes to foreclosure, compared to 4.5 percent of whites, according to the Center for Responsible Lending. Latinos, who have also been pummeled by the mortgage meltdown, came in a close second behind blacks in foreclosure losses.
The consequences are devastating. Fewer blacks own their home now than any other racial or ethnic group and that makes it even more difficult for them to achieve financial security and attain wealth.
“Billions and billions of dollars were stripped away from a community that already had lower levels of wealth than white communities,” said Debbie Bocian, senior researcher at the Center for Responsible Lending, which estimates blacks will lose $194 billion in wealth through 2012 due to the mortgage meltdown. “It exacerbates all the socio-economic divides. The consequences are intergenerational.”
Subprime lending and unemployment
During the housing boom, nearly seven in 10 Americans owned their home, a gain of 7.8 percent from a decade earlier. Black Americans saw their home ownership rates rise twice as fast to 49.1 percent, thanks in large part to easy credit.
But many of those new mortgages–which often came with low teaser rates that would adjust upward after two or three years–would prove unaffordable.
Overall, blacks were 150 percent more likely to get high-cost loans, according to the Center for Responsible Lending. Even when they had similar income and credit scores as white borrowers, blacks were about 30 percent more likely to be steered to expensive mortgages.
Now, the foreclosure crisis has now expanded beyond the subprime market. More and more people with stronger credit backgrounds and more stable mortgages are defaulting on their loans because they’ve lost their jobs.
But here too, blacks are at a disadvantage. Black unemployment stood at 16.1 percent in September, the highest of any group and 6.5 percentage points above the national average.
Tight credit going forward
It’s tough for anyone to get a mortgage these days. But it’s even more difficult if you are black.
Nearly one-third of blacks were denied loans in 2009, compared to 13.1 percent of whites and 25.6 percent of Latinos, according to federal data released last month. The disparity can’t be explained solely by differences in applicants’ incomes and loan amount requested. Even when these factors are the same, blacks are still twice as likely to be turned down, a Home Mortgage Disclosure Act report found.
Nearly 49.8 percent of blacks had their refinance applications rejected, compared to 21 percent of whites and 41 percent of Latinos.
These stats mean that many blacks can’t shift into lower-cost mortgages in order to save their homes, nor can they purchase their first property and boost homeownership rates.