As the nation’s foreclosure crisis has ripped through communities in every state, the National Association of Real Estate Brokers held a special “call to action” at its annual conference held in Fort Worth last week, saying the African American homeowner communities have been hit harder than other home owner segments.
The National Association of Real Estate Brokers held its 63rd annual convention in Fort Worth July 29 to Aug. 5.
According Vincent Wimbish, president of NAREB, the call to action will focus on ensuring transparency in all financial transactions, continued and expanded support for loss mitigation and pre-home purchase counseling services, restoration of sustainable homeownership as a viable wealth building option, and public policy “that prevents another economic tsunami from sweeping away the remaining hopes and dreams of the nation’s multicultural homeowners.”
And according to group leaders, the subprime mortgage meltdown and resulting recession is far from finished, particularly in the African American community. According to the Center For Responsible Lending, 11 percent of African Americans already have lost their homes, or are in imminent danger of losing their homes, and it is projected that between 2009 and 2012, $193 billion in wealth will be lost in the African American community.
The Center for Responsible Lending’s June 18 report titled “Foreclosures by race and ethnicity,” estimates 10 to 13 million foreclosures will occur in the United States before the crisis abates. Today, the report states that 52 percent of the nation’s at-risk borrowers are non-Hispanic whites, but only 15 percent of that group is at imminent risk of losing their homes. Comparatively, black and Hispanic home owners at imminent risk of losing their homes tops 21.6 percent and 21.4 percent, respectively.
Wimbish used strong words in describing the consequences of his organization members not pulling together to support change in the current residential real estate market.
“The color is green,” he said. “We got bamboozled by Wall Street because 56 percent of foreclosures are not in our community, but our community feels the same affect because the only loans being done in the communities of color – black and Hispanic communities – primarily were subprime loans, so we’re asking partners to join us because the color is green. And if we don’t come together and address this issue directly, were going to all be back on a plantation.”
The NAREB organization is a minority broker organization with 88 chapters throughout the nation, including one in Fort Worth.
The organization has introduced a number of alternative plans including a 10-year tax credit program or mortgage products based on a client’s ability to pay rather than on that client’s credit score, which is traditionally is how banks determine a client’s risk factor and ability to re-pay a loan.
“We are advocating that they create mortgage products that are not based on or determined by credit scores only. We want mortgage products based on loan to value, industry standard loan to value, a modest down payment,” Wimbish said. “The down payment HUD has currently is 3.5 percent and 3 percent seller concessions, but we know in our community we are advocating they target foreclosed properties and up to 6 percent seller concessions.”
Wimbish said Wall Street credit scores operate by predictable financial behavior – something that can sometimes disqualify some good potential borrowers.
“In lieu of credit score, we are advocating that they create a mortgage product that you can alleviate predictable financial behavior by having a consumer agree to automatic payment,” Wimbish said. “That way you don’t’ have to worry about getting your money because you know when they get paid, you collect that mortgage payment, if that’s a weekly, bi-weekly, or bi-monthly payment.”
Terri Attaway, president and CEO of the Fort Worth NAREB chapter, said the Center for Responsible Lending numbers aren’t shocking as they reflect what’s happening in the market today.
“It definitely is tougher out there,” she said. “You have to drill deeper now more than ever to educate people. But it’s still a great time to buy and if you can educate, then it’s good for everyone.
One such local program is offered by the city of Fort Worth and includes grants of up to $25,000 if one buys a home within a specified seven ZIP codes, which are the areas of the city most affected by foreclosures. Attaway said that program has many “hoops for home owners to jump through but the end result is worth it.”
“They have to do things like take a class, but our chapter offers a class that would qualify for that,” she said. “And any property where you stand to get that kind of help is worth it.
Attaway said another issue coming down the pipe will be an increase in FHA standards. Attaway said she recently heard talk that FHA, which now does not lend to anyone with lower than a 580 score, will open up loans to individuals with 500 to 580 credit scores – if they put 10 percent down.
“FHA already raised the down payment from 3 to 3.5 percent and there are a lot more changes coming and people have got to stay informed,” she said.
Maurice Jourdain-Earl, founder and managing director of Compliance Tech, also presented at the conference his soon-to-be-released report titled “By the numbers, disparities in credit availability for African Americans and Latinos 2004-2008.” The report, which will be available in the coming months, is based on data derived from the Home Mortgage Disclosure Act and, according to Jourdain-Earl, shows that African Americans and Latinos are disproportionately affected by the lack of credit.
“These perceptions are continuing to drive these disparities that will have a disproportionate impact on communities of color,” he said at the conference.
Jourdain-Earl touched on strategic defaults by home owners, or home owners who have decided it makes more sense for them to turn over their keys to the bank and walk away from the home because the home is worth less than what they paid for it originally.
“Those strategic defaults are increasing and believe it or not, many of those strategic defaults are not happening with low or moderate income or minority consumers, but mostly with middle and upper income folks who have made the calculus just like with any other investment that it is easier to walk away,” he said.
