Minorities Worst Hit By Foreclosures

According to reports coming in from surveys, it is the minorities who are worst hit by foreclosures. Today many of the sub-prime mortgage lenders have downed shutters. But this was their own doing – they dug their own graves by targeting the minority communities to make them rise to the bait of the dubious loans. With crumbling real estate prices, along with the borrowers these lenders too are being wiped out.

The loans of these companies made up 20% of all the loans given to the minorities or in localities dominated by the minorities as compared to 4% sanctioned in all white regions. This is according to a survey conducted by policy research and advocacy groups. In clear language it is stated by Sarrra Nifici of Neighborhood Economic Development Advocacy Project, New York that “These high risk lenders were targeting their loans to particular neighborhoods – to communities of color.”

The lenders were sure that considering the weak income of the group, sooner than later they would be in charge of the property and sell it keeping a high profit. The borrowers, because of their weak economic status, saw this as their only chance to realize the great American dream of owning a house. They too reasoned that with escalating house prices within a few years they would be able to repay the mortgage. Nifici explained that when one walks into a sub-prime office there is no incentive for the client to be steered elsewhere. Thus sub-prime seems to be the only option – the option that ultimately led to the foreclosure crisis.

The survey studied the regions covered by 35 high-risk lenders who were very busy in 2006. Later they went bankrupt or were shut down or sold in 2007 as the bubble burst. The main offenders were New Century Mortgage, WMC Mortgage, Fremont Investment & Loan as well as Argent Mortgage. The focus of the survey was on loans given to minorities in the urban zones markets covering areas in New York, Chicago, Los Angeles, Cleveland, Boston, Rochester and Charlotte and NY. In seven of these urban pockets the dubious loans give out by these questionable lenders to minority neighbourhoods, were three times higher as compared to the white localities.

Many of those with low incomes or tarnished credit records were offered teaser rates that reset abnormally later on. It made it impossible for borrowers to carry on later and foreclosures became inevitable.