For many, the foreclosure crisis has been pinned on uniformed minority and low-income borrowers as well as policies that support them in becoming homeowners. This myth has led some to consider low-income buyers as not ready for homeownership, as part of the problem rather than the solution.
A recent groundbreaking study by Maurice Jordain-Earl of ComplianceTech researches the demographics of the subprime fiaso and reveals that upper-income borrowers across all racial groups had the largest number of subprime rate loans, followed by middle-income borrowers from all racial groups. The study concludes that the meltdown “is better described as a mainstream white suburbia problem with aspects that affect minorities and urban communities. Erroneous assumptions about the demographics of subprime rate lending will only lead to poor decisions that result in ineffective solutions.”
Manna’s and others experiences have been that low down payments, 30 year-fixed rate loans and financial education/counseling have proven to be the key ingredients for making low-income home buyers successful, even through the foreclosure crisis. And homeownership has been a legitimate and important way for these responsible buyers and their families to build assets and move up the economic ladder. Low-income buyers are and can be part of the answer to the crisis we are in.
There has always and continues to be a wealth gap between whites and minority groups in the United States. According to a recent Pew Research Center study, the median wealth of white households is 20 times that of black households and 18 times that of Hispanic households. Though the gap has significantly widened in recent years, this gap also has deep roots in the history of the United States, including discriminatory policies and practices that limited the traditional way Americans have increased their wealth: Homeownership.
For a history of homeownership and race in the United States, see the below segment of the documentary “Race – The Power of An Illusion”:
The newly released proposed FY2010 budget includes cuts to valuable housing programs, including Local Rent Supplement and housing first. We are currently in the process of parsing through the proposed budget numbers to find where the money is being reallocated.
The city’s tactic of cutting funding to these programs is a temporary fix and will have negative long term repercussions. We are hoping that the city can responsibly raise revenue in order to protect these and other critical housing programs.
The the rise in foreclosure underscores the need for action and leadership from our public officials. Though the numbers are not as significant as our neighbors in Northern Virginia and Prince George’s County, this is a frightening trend that cannot be ignored.
HAT’s suggestion to the City Council and other public officials is that HPAP (Home Purchase Assistance Program) can be utitlized to stabilize the bottom third of the housing market, thus securing the real estate values in the city. Sadly, HPAP remains woefully underfunded. In FY2010 budget, HPAP has been scaled back to accomodate less than 300 borrowers, reduced by 40% of its historic annual capacity.