By Stacy Nguyen
Northwest Asian Weekly
New 2010 Census data show that the housing bust has hit some communities of color the hardest.<!–more–>
Blacks, Latinos, and Asian immigrants were more likely to take out subprime loans during the housing boom. Subprime loans generally featured low initial interest rates that skyrocketed some years later. Some borrowers are unable to keep up with the payments and face losing their homes due to foreclosure.
“For us, this is a fair housing issue and a civil rights issue,” said Hurricane Relief Program Director Deborah Goldberg, from National Fair Housing Alliance, on a conference call. “In fact, we view this as one of the most import civil rights issues of the decade.”
While some say that Blacks, Latinos, and Asian immigrants depended on subprime loans because these were the only loans they could afford, others say that certain mortgage lenders and brokers actually targeted communities of color in order to make more money off of lending fees and higher interest rates.
“This crisis affects us all but has hit communities of color hardest, not just once, but like a tsunami, leaving [families] in ruin in many cases,” added Goldberg. “Subprime loans were targeted to [communities of color] in particular, and as the economy generally worsened and unemployment hit record highs, we see that people of color were hit twice as hard [compared to the general population]. It’s disproportionate. This is why this is a civil rights issue for us.”
“In Latino communities, related to the housing crisis, about 17 percent — more than a million people — have lost or will lose their homes to foreclosure, as of 2006,” said Graciela Aponte, senior legislative analyst at the National Council of La Raza, on a conference call. “This is compared to 7 percent of white homeowners.”
Asian Americans were also affected by the housing crisis. In the Fall/Winter 2010 issue of Asian Outlook, by the Asian Pacific Fund, it was reported that more than 67,000 Asian families lost their homes between January 2007 and December 2009.
The report notes that Asian households are often composed of multiple generations and include extended family members, so there is a higher number of people affected by foreclosure — about 204,000 people.
“In California, many Asian Americans have lost half of their wealth,” said Preeti Vissa, director of Greenlining Institute’s Community Reinvestment Program, on a conference call. “It’s not just an issue of homes, but an issue of creating a cycle of poverty that starts in this generation, that will affect future generations to come.”
Studies have shown that some lenders sold subprime loans to Blacks, Latinos, and Asian immigrants, even when they qualified for cheaper traditional loans. First-time buyers who are immigrants often have a hard time understanding all the steps it takes to buy a home. Often, they are coerced by predatory lenders into signing documents that they do not fully understand.
“Something that we don’t understand is that African Americans, Latinos, and Asians are five times more likely to receive a predatory loan, not as a result of their own choice, but as a result of the lack of access they have to financial services,” said Vissa. “Banks that were regulated were far, far less likely to make the kind of loans that were doomed to fail. But communities of color did not always have access to those kinds of lenders.”
“Rather, predatory lenders, unregulated entities, came to people’s churches, their communities, their supermarkets and said, ‘Hey, I can help you. I can give you a deal. Don’t worry about it.’ It’s these unregulated lenders, mortgage brokers, and credit card companies that have harmed communities of colors,” said Vissa.
“The CFPB is our cop on the beat,” said Vissa. “It will be looking proactively at the banks, making sure products and services are intended to help families grow their wealth, and also to make sure rules are not broken.”
On July 18, President Barack Obama nominated Richard Cordray, 52, to run the new U.S. Consumer Financial Protection Bureau (CFPB).
The CFPB mission is to make markets for consumer financial products and services work fairly for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products. Its responsibilities include working to educate consumers against abusive practices, enforcing federal consumer laws, and supervising banks, credit card unions, and other financial companies.
Cordray, Ohio’s former attorney general, is also known for suing major financial firms, including Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc., and Ally Financial Inc.
Cordray’s nomination is widely opposed by Republicans. In May, about 44 Republican senators vowed to block the nomination and will continue to do so until the CFPB is restructured. Out of 100 members of the Senate, at least 60 votes are need to confirm the nomination.
Republicans say that they fear that the CFPB has been given unprecedented regulatory powers, with an unelected head. They say that they want the director position eliminated in favor of a board, similar to the U.S. Securities and Exchange Commission (SEC), and like the SEC, that the CFPB is funded through congressional appropriations, rather than independently. This would result in less funding than it currently has.
Supporters of the CFPB as it is say that a board would comprise the CFPB’s independence, and therefore, impede its ability to fully protect consumers.
“Unfortunately, the government agencies who were responsible for setting firm and fair rules for mortgage lending and [were responsible] for enforcing the rules failed to live up to their responsibility,” said Goldberg. “Many of us repeatedly called on the government to act [before the fallout]. But when action came, it was too little too late. Now, we are all paying the price. This is why it’s critical that we make sure this doesn’t happen again.”
“One of the few bright spots in the dreary picture is the creation of the CFPB,” added Goldberg. “The bureau has a major fair lending function. … It has an office of fair lending, whose director reports directly to the bureau.”
Though the CFPB officially began work on July 21, it might not have a confirmed director until after the 2012 election because Corday’s nomination is being blocked. CFPB is currently headed by Raj Date, adviser to the Treasury secretary, though the agency is effectively on hold without a director.
Once a director is confirmed, the CFPB will be an independent agency within the Federal Reserve. (end)
For more information, visit www.consumerfinance.gov.
Stacy Nguyen can be reached at email@example.com.