Mortgage Lowdown

The last decade has been a good time for the housing industry, the mortgage loan industry and for people belonging to the lower economic strata of society. The housing boom during this period helped a large number of people take homes, which they otherwise may not have been able to afford.

And the fact that minority home ownership rates rose above 50 percent for the first time in 2004 is a laudable fact. But before we go into a back-patting mode, let us look at the deeper and murkier part of this entire story. Behind this success lies a disturbing trend. In the past few years areas with large poor and minority populations in places like Cleveland, Chicago, Philadelphia and Atlanta have experienced a sharp rise in foreclosures. In some cases, these have more than doubled. According to a recent report, black people in Cuyahoga County were nearly 3 times more likely than white people to have received a high-interest mortgage loan last year, regardless of how much they earned. And this is just the foretaste of the can of worms that was opened thanks to recently released federal data.

What then happens is that communities like Blacks and Latinos are unable to pay the high rates and more often than not, the story ends in foreclosure. What’s sad is that this cycle is not going to end anytime now. According to experts, this is only the first wave of financial distress and there is more to come. And the culprit in all this is the subprime mortgage, which initially seemed like a godsend and has now become a nightmare for the minorities.