SUB-PRIME MORTGAGE INDUSTRY AND ITS IMPENDING IMPACT ON AFRO-AMERICANS

Posted in General, May 30th, 2007 |

It is mostly the Afro-Americans who are turned down when they apply for a house loan because of their tarnished credit history. But the feeling in them as in all others to own a hearth and home is very strong. This leads them to fall prey to sub-prime real estate dealers who let them have their dream house with a nightmare tagged to it. The rates of interest are much higher than the usual ones. It is inevitable that a rainy day or two in their lives compel them to fall back on their loans repayments. This is when the vultures move in for the kill.

Nearly two million Americans are caught up in this ‘sub-prime tsunami’! The Centre for Responsible Lending has released a report, in which it is predicted that 2.2 million sub-prime loans will land up in foreclosures. It will have a snow balling effect in the housing market that will be flooded by houses. House owners who received mortgages will lose $164 billion in home equity during the period 1998 to 2006. On the other hand the lenders will see a fantastic boom in their profits from $35 billion to $665 since 1994.

Officially all races can take the mortgages but Afro-Americans bear the brunt. A report of ACORN says that more than half of all mortgages were granted to Afro-Americans. Therefore they will suffer the most. Of the sub-prime loans expected to run into default, 10% were granted to Afro-Americans, 8% to Hispanics and 4% to whites.

Griffin, the President of Home-Free USA claims helplessness in the face of this tidal wave of foreclosures. She vehemently denies that they are taking advantage but the fact is that they are helpless. She says that the main reason for this situation is because the borrower is tempted to walk into the trap without directly knowing the clauses that are often couched in difficult terms. It is not open and clear. In many cases the sub-prime loans the annual mortgage rate, ARM, increases after a specified number of years. Many borrowers under the ARM scheme are not even aware that they are under it, until it is too late. So the main thing is to start an awareness campaign. It is the victims themselves that must be armed against these recurring dangers.

Via