Minorities Worst Affected By Foreclosures
Monday, September 10th, 2007According to a survey in 2006 Detroit recorded the highest high-cost mortgages in the previous year. A community activist organization, Acorn, has been studying in depth the fall out of mortgages. They have concluded that relatively more Afro-American and Hispanic borrowers have been victims of high-cost mortgage schemes in comparison to the whites. Thus more of the minorities are buckling under the pressure of increased mortgages and losing their houses. The Association of Community Organizations for Reform Now (ACORN) has a website of its own and caters to the needs of low and medium income groups.
The study has been conducted on 172 American cities. Afro-Americans are 2.7 times and Hispanics 2.3 times more susceptible to avail of high cost loans than the whites. These minorities were also more prone to get high-cost refinancing loans – Afro-Americans 1.8 times and Latinos 1.4 times.
68 of the 178 cities had the same story to tell. On an average one out of three loans fell under the high-cost category with the interest being reset at a higher level. The high cost loans clustered around Detroit, Laredo, Texas, Mcallen, Jackson and others.
The president of Acorn, Maude Hurd is of the opinion that it was because the minorities had less chance than their white brothers to avail of prime loans that they had no alternative but to opt for the sub-prime category. The irony is that it is this deprived group that needs the maximum help to live under their own roof.
Foreclosure listings are increasing by the day with more areas falling under its grip. Owners are helpless sandwiched between rising interests and falling property prices, which in turn affects equity. Acorn is keeping regular tabs and releasing regularly its findings. Acorn scrutinized facts detailed in 2006 availing of the Home Mortgage Disclosure Act. According to the latter (HMDA) lenders have to state the race, gender and census tract of their borrowers. From this it can be estimated whether the loan fell under the sub-prime or high-cost category. Information was got about 363 lenders. It represented 68.5% of all mortgages (residential units) that started off in 2006 and 50.5% of the sub-prime category. These facts were the materials for study.
According to Acorn loans having a percentage rate of a minimum of 3% per annum above the rate on US securities fall under the high-cost category.
