Threat to American dream of home ownership devastating for minorities

11th July 2011   ·   1 Comment

By Barbara Arnwine
TriceEdneyWire.com

As the economic downturn continues to plague employment, education and every other aspect of American living, including housing, it is imperative to note the ongoing loss of wealth in communities of color wrought by the loss of homeownership through foreclosures and loan modification scams. As homeownership month just closed in June, I am particularly reminded of how the attainment of the “American Dream” for African-Americans and Latinos continues to be threatened at the hands of not only loan modification scams and foreclosures, but also discriminatory and disparate lending practices.

According to the Center for Responsible Lending’s (CRL) June 2010 report, “Foreclosures by Race and Ethnicity: The Demographics of a Crisis,” an estimated 17 percent of Latino homeowners and 11 percent of African-American homeowners have lost homes to foreclosure or now are at imminent risk.”

Sadly this trend has not abated in the past year. This unprecedented loss of homeownership continues to sap wealth in minority communities and contributes to declining neighborhood property values nationwide.

In addition, recently proposed federal standards for a “Qualified Residential Mortgage” pose a new threat to homeownership opportunities for countless families. As noted by CRL, it would take the average African-American household 15 years to accumulate a 10 percent down payment and 5 percent closing costs, and average Latino households would need 12 years to do so. This, on top of the remaining double-digit unemployment disparities and less access to credit facing African-Americans and Latinos, is a worsening factor in the ability for these communities to become and to remain viable homeowners.

The second wave of the foreclosure crisis, loan modification scams, continues to affect thousands of homeowners who fall prey to unscrupulous scammers. Many of these homeowners were minorities steered toward subprime loans, despite qualifying for prime loans. Scammers literally steal funds from desperate homeowners who are behind in their payments by promising to obtain favorable loan modifications for a fee but who in reality do nothing to assist these homeowners after taking their money.

Some scammers entrap homeowners by promising to refund all monies paid if they are unsuccessful in obtaining a loan modification but never do so. The worst scammers use purposefully misleading names to trick homeowners into thinking that they are their lending institution or even governmental entities trying to help. Since the February 2010 launch of the Lawyers’ Committee for Civil Rights Under Law’s National Loan Modification Scam database, more than 15,000 homeowners have reported scams or potential scams totaling over $35 million in lost money. These scammers claim phantom foreclosure counseling, lease-back or repurchase scams, and more.

Much legislation has been amended and introduced in order to prevent discriminatory practices in the housing market, however, advocacy for improved enforcement of the fair housing act and other legislation must continue. The Lawyers’ Committee for Civil Rights Under Law’s Fair Housing and Fair Lending project has done substantial work in amending the Fair Housing Act, advocating for the Disparate Impact Standard of Proof for Violations of the Fair Housing Act, supporting the Dodd-Frank Wall Street Reform and Consumer Protection Act and continuously litigating discriminatory lending for minorities’ rights.

We also continue to advocate for legislation to give bankruptcy judges the authority to resolve mortgage debts on owner occupied homes which would be the most important tool for families of all races. With less than 50 percent of African-Americans owning homes, compared to over 70 percent of non-Hispanic Whites (U.S. Census Bureau), African-Americans and other minorities are heavily affected by litigation, legislation and practices surrounding fair lending and fair housing. Too often, substandard housing, segregation and the lack of affordable housing in minority communities continuously worsens economic, political and educational disparities.

Even though America continues to struggle through an economic downturn and the housing market is seemingly unsecure, owning a home is still important and possible in today’s society. Buying and owning a home is a vital part of the American dream; unfortunately, loan modification scams, discriminatory lending and foreclosure all undermine this aspiration, turning it into a nightmare. For this reason, we urge the Obama Administration and Congress to resist budget cuts which would eliminate or decimate vital home counseling programs.

To preserve the American Dream, homeowners must stay informed, utilizing resources available through national and local organizations and government agencies, and demand justice and equality. Only then will buying and maintaining a home not be a dream deferred.

I, along with the dedicated staff of the Lawyers’ committee and other allies, will continue to combat barriers to fair housing and lending, especially in communities of color. It is incumbent upon Congress, now more than ever, to move on establishing an independent Consumer Finance Agency and strengthen home lending rules and other financial reform legislative matters. Furthermore, Congress and the Administration must work aggressively to address systemic economic inequalities and barriers to a level playing field for all Americans, including homeownership, a key contributor to wealth accumulation.

Barbara Arnwine is Executive Director of the Lawyers’ Committee for Civil Rights Under Law.

This article originally published in the July 11, 2011 print edition of The Louisiana Weekly newspaper.