the housing crisis, foreclosures and race
TRANSCRIPT
Ohio Organizing Collaborative Housing Summit
Columbus, Ohio
July 29, 2009
THE HOUSING CRISIS, FORECLOSURES AND RACE
Stephen Menendian
Senior Legal Research Associate
Kirwan Institute for the Study of Race & Ethnicity
The Ohio State University
The Foreclosure Crisis2
A National Epidemic
An Epidemic
Foreclosures in Ohio were a pressing issue well before they became a national epidemic.
Foreclosure filings have increased every year since 1995.[1]
As of June 2009, there was one foreclosure in Ohio for every 449 houses, and Ohio ranked 8th in the nation in foreclosure activity.[2]
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[1] Rothstein, David and Sapna Mehta. “Foreclosure Growth in Ohio 2009.” PolicyMatters Ohio, March 2009. Page 6.[2]Realtytrac, Accessed July 23, 2009 at http://www.realtytrac.com/trendcenter/default.aspx
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Ohio Foreclosure Totals: 1995-2008
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Foreclosure Outlook: Rate Resets
Source: Credit Suisse
Monthly Mortgage Rate Resets (in billions of dollars)
Slide Adapted from Presentation by: Solomon
Greene, Open Society Institute,
Neighborhood Stabilization Initiative
Foreclosures and Race
In Cuyahoga County, African Americans make up 74% of the population in the quartile with the highest rates of foreclosure, but only 3% of the population in the quartile with the lowest rates.[3]
½ of Cuyahoga County’s African American population lives in census tracts in the quartile with the highest rates of foreclosures, with 1/3 living in the tracts of the quartile with the second highest rate of foreclosure.[4]
While these tracts contain almost 40% of foreclosure filings, they house only 19% of the county’s total population.
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[3] Nelson, Lisa. “Foreclosure Filings in Cuyahoga County.” The Federal Reserve Bank of Cleveland. A Look Behind the Numbers 1(1).Fall 2008. Page 5. Accessed July 23, 2009 at http://www.clevelandfed.org/Our_Region/Community_Development/Publications/Behind_the_Numbers/2008/0908/ALBTN_V1_I1.pdf[4] Nelson. “Foreclosure Filings in Cuyahoga County.” Page 5.
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-Communities of color were historically starved of credit
-Lenders targeted communities of color with subprime loans
-Lack of loan information or understanding for consumers in many of these communities
-Mortgage securitization and the growth of the subprime industry created incentives to target new markets with mortgages
8Why is the foreclosure crisis in Ohio highly racialized?
Credit9
Cleveland: Subprime Loans and Foreclosure
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Maps: Produced and adapted from Charles Bromley, SAGES Presidential Fellow, Case Western University
Subprime Loans
About half of all subprime loans went to African American and Latino borrowers.
People of color were 30% more likely to receive subprime, even after factoring out financial differences.
30% of subprime borrowers qualified for prime loans
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Racial Disparities in Lending
Upper income whites received high cost loans only 10% of the time.
Upper income African Americans received high-cost home purchase loans 32% of the time in Ohio, compared to 20% of the time for low income whites.
For refinance loans, upper income African Americans received high-cost loans 38% of the time, compared to 26% of the time for low income whites.
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Source: Persisting Racial and Ethnic Disparities in Ohio Mortgage Lending, Housing Research and Advocacy Center
Columbus
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Connecticut
14
Residential Segregation15
Historical Policies Contributing to Residential Segregation and Isolation
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Segregation as policy Jim Crow in the south
The Great Migration North FHA policies upholding segregation
Redlining, discouraging mixed race neighborhoods Blockbusting, racially restrictive covenants and
other forms of discrimination in the housing industry
Urban renewal, highway construction and public housing policy
Suburban sprawl and white flight
17
Historical Government Role
“If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally contributes to instability and a decline in values.”
–Excerpt from the 1947 FHA underwriting manual
Institutionalized Disinvestment: Redlining Map of Philadelphia
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19
The Rise of Suburbia:But not accessible to everyone
In the suburb-shaping years (1930-1960), less than one-percent of all African Americans were
able to obtain a mortgage.
N
EW
S
African American Population in Franklin County by Census Tract 1970
Prepared by:Kirwan Institute for the
Study of Race & EthnicityDate: 10/13/05
Source: Census, NCDB
0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%
Highways
Columbus Public School District
% African American
Legend:
N
EW
S
African American Population in Franklin County by Census Tract 1980
Prepared by:Kirwan Institute for the
Study of Race & EthnicityDate: 10/13/05
Source: Census, NCDB
0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%
Highways
Columbus Public School District
% African American
Legend:
22
N
EW
S
African American Population in Franklin County by Census Tract 1990
Prepared by:Kirwan Institute for the
Study of Race & EthnicityDate: 10/13/05
Source: Census, NCDB
0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%
Highways
Columbus Public School District
% African American
Legend:
N
EW
S
African American Population in Franklin County by Census Tract 2000
Prepared by:Kirwan Institute for the
Study of Race & EthnicityDate: 10/13/05
Source: Census, NCDB
0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%
Highways
Columbus Public School District
% African American
Legend:
Residential Segregation
o Communities of color and low-income communities were physically, socially and economically segregated from prime credit markets.
o People in these communities were subject to sub-par lending from rent-to-own, to payday lenders, to check cashing places that all charged exorbitant interest rates.
And finally…subprime home loans
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From Redlining to Reverse Redlining:A historical view of redlining zones in
Philadelphia and areas of foreclosure in minority
communities.
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Impacts
Communities of color further inundated with vacant properties
Mortgage applications for African Americans and Latinos dropped approximately 40% from 06 to 08 Compared to 19% for White’s
African American and Latino homeowners are expected to lose more than $250 trillion in assets due to the crisis Compounding the existing 900% racial wealth gap
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Social Justice and Housing: A Web of Challenges
Racial Housing
Challenges
Questions or Comments?
For more information about the racial impacts of the foreclosure crisis, visit our convening web site at:
http://www.kirwaninstitute.org/events/archive/subprime-convening/index.php
To Learn More about the Kirwan Institute: www.kirwaninstitute.org