Foreclosures Hit All African-American Income Groups About the Same
The foreclosure rate among higher income, non-Hispanic whites was just above 4 percent, compared with 5 percent for middle-income whites. Among moderate-income whites, the foreclosure rate was nearly 6 percent, and among lower- income whites, it was above 6 percent.
The organization defined low income as borrowers at 50 percent below the area median income; moderate income refers to borrowers at 50 percent to 80 percent of area median income; middle income referred to borrower at 80 percent to 120 percent of the area median income and high income referred to borrowers at 120 percent or above the area median income.
The center reported that the disparity in foreclosure rates among African Americans, Hispanics and whites is tied to mortgage-loan products.
“We find that borrowers in minority groups were much more likely to receive loans with product features associated with higher rates of foreclosures, specifically higher interest rates, hybrid and option ARMs [adjustable rate mortgages] and prepayment penalties,” center officials reported.
The study found that 21.4 percent of African Americas with credit scores over 660, which is considered a high credit score, received high-interest-rate mortgages, 3.5 times higher than the proportion of non-Hispanic white borrowers receiving high-interest loans. The organization based its report on data provided under the Home Mortgage Disclosure Act.
So far, 25 percent of African American homeowners either have lost their houses to foreclosure or have become seriously delinquent, according to the report. The foreclosure rate has destroyed black communities. In Detroit, for instance, more than 33 percent of African–American homeowners have lost their houses to foreclosure, the center reported.
“This is a staggering statistic for a city that once had one of the highest African–American homeownership rates in the country,” the report said.
Center for Responsible Lending Officials noted that this is the fifth year of the nation’s foreclosure crisis, and that it does not show any signs of abating.
So far, 6.4 percent, or 2.7 million homes, have gone into foreclosure, and 8.3 percent of families are at risk of losing their homes, the report said. Among African Americans, the center officials predict 25 percent will lose their homes to foreclosure before the crisis ebbs.
The foreclosure crisis will have a devastating effect on black wealth.
“The average white household now has twenty times more wealth ($113,149) than the average African–American ($5,667) household,” the report said. “The ongoing foreclosure crisis will only exacerbate this growing inequality, as more African–American households see their assets erode either directly through foreclosure or though loss of home equity resulting from concentrated foreclosures in their neighborhoods.”