Wednesday, March 28, 2007

All too often, subprime = minority

"Behind Foreclosures, Ruined Credit and Hopes,"the story in today's NYT about the foreclosure crisis in Newark, NJ, emphasizes something that hasn't been talked about often enough in stories about the collapsing subprime mortgage market. All too often, subprime mortgages are minority mortgages.
The tales of financially beleaguered Newark are not only about subprime loans. Unforeseen financial problems, misunderstandings about complex mortgage transactions and poor money management have been major factors in bringing some first-time homeowners to the brink of foreclosure.

And the situation mirrors conditions in large urban areas across the country and around the metropolitan region. Neighborhoods in Queens, the Bronx and Brooklyn also have large concentrations of subprime loans, which are at high risk of foreclosure, according to Home Mortgage Disclosure Act data examined by The New York Times. The study by the Center for Responsible Lending predicts that nearly 22 percent of the subprime loans in the New York area made in 2006 will go into foreclosure in the next few years, one of the highest rates in the nation. And in suburban counties like Nassau, Orange and Putnam, the percentage of households spending at least 50 percent of income on housing has been rising.

While the overall number of foreclosures nationwide remains low — in New Jersey, it is less than 2 percent of all outstanding mortgages — it masks the reality of conditions in lower-income, heavily minority neighborhoods like Mr. Abazie’s, where multicolored “Avoid Foreclosure” and “Sell Your House” signs seem to decorate most of the lampposts.
It's a story that actually takes on more force online. The accompanying slide show is in color and has more photos than the print edition has room for. The Interactive Graphic lets you click back and forth between three views of Newark Census tract maps. The overlap between the locations of foreclosures, concentrations of minority housing and subprime loans is persuasive and disturbing.

Looking at the maps, I was struck by the fact that this is almost a kind of redlining in reverse. It used to be that minorities in redlined areas couldn't get credit, no matter how qualified they were. Then the rules changed, and credit became freely available to anyone on easy terms, except that, hidden in the fine print, there were adjustable rates and draconian terms that would make a Mafia loan shark blush, waiting to blow up. And now we're seeing the explosion.

So far this hasn't really been a political issue. But if this continues for a few more months, as it seems sure to do, there's no way politicians can avoid taking a stand.

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