The New Face of Housing Discrimination
"Things had gotten pretty bad," says Matthews, who purchased her home seven years ago with a mortgage amount of about $250,000. "It was unbelievable to me that the banks weren't willing to work with me. I had never been late on my mortgage."
If she lost the house, not only would she have to find a new home -- but her mother and three teenage foster children would have to find a new place to live, too.
Matthews, who is African-American, is not alone. African-American and Latino homeowners have a disproportionate share of foreclosures nationwide compared with their percentage of homeownership, according to a new study conducted by the Center for Responsible Lending.
"Even though African Americans are 9 percent of the nation's homeowners, they make up 26 percent of the clients in the program," says Erin M. Angell Collins, a spokesperson for NeighborWorks America, the Congressionally created nonprofit that runs the National Foreclosure Mitigation Counseling Program. Latinos make up 8 percent of the nation's homeowners, a decrease from 11 percent in 2009, but 21 percent of the NFMCP program clients are Hispanic homeowners, Collins says. "They are in all stages of foreclosure or about to enter into foreclosure."
Why is housing discrimination of any kind still happening, and what can be done to prevent it?
Some experts say this kind of discrimination is simply an extension of the days when minorities couldn't get loans or buy in certain neighborhoods.
These days, Latinos and blacks get loans, but the loans typically are priced at a higher rate than white borrowers pay. Although the majority of families (an estimated 56 percent) who lost homes were non-Hispanic whites, Latino and African-American families disproportionately received the most expensive and risky types of loans during the subprime lending boom, according to the study, making them more heavily affected.
When blacks and Latinos turn to the banks for help refinancing or modifying the terms of their loans, says an Urban Institute study, the banks aren't so willing to help unless a nonprofit counseling agency intervenes on their behalf. Without outside intervention, the homeowner is more likely to lose their home.
The Urban Institute's study found that moderately delinquent homeowners and those facing foreclosure -- who received housing counseling through the National Foreclosure Mitigation Counseling Program -- were 60 percent more likely to avoid losing their home to foreclosure than homeowners who did not seek counseling.
Vanessa Matthews eventually received a permanent loan modification with the help of the Neighborhood Housing Services of Chicago. Through the program, Matthews' monthly mortgage payments were nearly cut in half to $1,398. The interest rate was cut from 7 percent to 2 percent for five years (when it will adjust to 3.95 percent), allowing her to keep her home.
Here are steps that homeowners can take to help prevent becoming victim to housing discrimination:
Know the true cost of your loan
Is the monthly payment you're quoted a PITI, meaning it includes property taxes and mortgage insurance? Sometimes the monthly payment that a lender quotes you might not include these other fees, artificially deflating what you will owe.
A low interest rate the first few months means lower payments until the mortgage adjusts. What a buyer thought they could afford, it turns out a few months later, they can't.
"With Latinos we find many more cases of deceptive lending and use of teaser rates that mask the true terms of the mortgage," says Richard Kahn, author of "Winning Against Foreclosure." "Once they are in the mortgage, they can afford the payments until the adjustment."
Understand what you sign
If you need more time to read through mortgage terms, or you need a copy in your native language so that you can better understand the fine print, then don't hesitate to ask.
The laws that require people who don't speak English fluently to have exact full duplicates of documentation in their native language are rarely complied with, says Kahn, who is also a Miami-based mortgage fraud expert witness through Forensic Professionals Group USA.
Predatory lending is as common in the African-American community as it is with Latinos, he says.
"I don't know if it is that these folks are more trusting, less educated, less serious about protecting themselves from predatory lending or what. It is difficult to say after the fact. We are a forensic firm that looks into the paperwork, not the borrower's individual stories," he says. "The one common denominator we see is wholesale deception, deceit and misrepresentation on these folks especially."
Avoiding scams and finding help
"The sooner that a homeowner believes they may be in danger of foreclosure, even before they miss a payment, they should go see a credit counselor first," says Collins. "I urge homeowners who have been especially hit hard to go to findaforeclosurecounselor.org and to look up housing counseling agencies in your community," she says.
When you're nearing foreclosure, nonprofit credit counseling is a good bet to help you negotiate directly with lenders, says Kahn. "Relying on the government to protect minorities is like relying on the police to prevent a crime," he says. "The police clean up and investigate after the fact mostly, and so do the authorities in mortgages. At that time, unfortunately, it is too late."
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