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THE HOUSING CRISIS:OPPORTUNITY, COMMUNITY ANDRACEJason ReeceSenior ResearcherOpportunity Communities InitiativeKirwan Institute for the Study of Race & EthnicityThe Ohio State University Town Hall on Economic Crisis & Foreclosure; Interfaith Vigil for Workers, Homeowners & Tenants Sponsored by Jobs for Justice - Columbus, Ohio - October 1, 2009
The Housing Crisis2 Where are we? A Crisis: for the nation, out state and our neighborhoods How did we get here? What happened? What needs to happen? The three “R’s” Rescue, Revitalization and Reform
An Epidemic 3 Foreclosures in Ohio were a pressing issue well before they became a national epidemic. Foreclosure filings have increased every year since 1995. As of June 2009, there was one foreclosure in Ohio for every 449 houses, and Ohio ranked 8th in the nation in foreclosure activity. Rothstein, David and Sapna Mehta. “Foreclosure Growth in Ohio 2009.” PolicyMatters Ohio, March 2009. Page 6.Realtytrac, Accessed July 23, 2009 at http://www.realtytrac.com/trendcenter/default.aspx
Density of foreclosure filings, January 2003-March 2004 Slides Obtained from The Columbus United Way, Prepared by Community Research Partners
Density of foreclosure filings, January 2007-March 2008 Slides Obtained from The Columbus United Way, Prepared by Community Research Partners
Density of properties at Sheriff’s Sale, Jan 2005-Mar 2008 Slides Obtained from The Columbus United Way, Prepared by Community Research Partners
Density of properties with high rate mortgage*, June 2008* Mortgage loans withinterest rate of 8%+
Density of properties with ARM or balloon loan*, June 2008 Slides Obtained from The Columbus United Way, Prepared by Community Research Partners* Among mortgage loanswith interest rate below 8%
The Impact of ConcentratedForeclosures in aneighborhood Foreclosures pull wealth/equity and assets out of the neighborhood Widespread displacement of renters, homeowners which rips the neighborhood’s social fabric and creates instability for school age children The growth of vacant property encourages crime, disinvestment and public safety risks 10 Challenges which eventually ensnare all residents (even those
What Happened?11 How did we get here? A changing system (broken system) Vulnerable communities struck first TheMiner’s Canary Race, Credit, Lending and Foreclosure
Prior to securitization… Pre-Depression: The Two Party Housing Market Party 1 Party Post-Depression FHA 2 Homebuyer Era: Seller (and/or) The Three Party Lending Institution Mortgage Market Party Party 3 Party 2 1 Government Lending Sponsored Institution purchases, insures Homebuyer Institution or underwrites loanBased on research by ChrisPeterson, University of Utah Law School
Subprime Loans14 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
Why is the growing foreclosure problem causing problem in communities of More than Just color? Foreclosures and a -Lenders targeted Few Bad Borrowers: communities of color with subprime Understanding the loansCredit Crisis Impact in -Lack of loadCommunities of Color information or understanding for consumers in manyWhy Were Subprime of these communitiesLoans Concentrated in These -Communities were historically starved Neighborhoods? of credit -Mortgage securitization and the growth of the subprime industry created incentives 15 to target new markets with mortgages
The Footprint of History “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 16
Institutionalized Disinvestment:Redlining Map of Philadelphia 17
From Redlining to Reverse Redlining: A historical view of redlining zones in Philadelphia and areas of foreclosure in minority communities.18
The Subprime Lending and Foreclosure Crisis: The Baltimore Experience – The City of Baltimore v. Wells Fargo “We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s (Wells Fargo) top-producing subprime loan officer nationally. “Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take19 out subprime loans.” From the NY Times. June 6th 2009. “Banks accused of pushing mortgage deals on Blacks”
Cleveland: Subprime Loans and Foreclosure20 Maps: Produced and adapted from Charles Bromley, SAGES Presidential Fellow, Case Western University
What Needs to Happen? (3 R’s)22 Rescue House Bill 3 Loss of income/job driving new wave of foreclosures Half of borrowers fall behind again despite home-loan helpinitiatives Avoid challenges with existing Thursday, October 1, 2009 3:20 AM BY ALAN ZIBEL ASSOCIATED PRESS WASHINGTON -- Lenders are ramping up efforts to avoid home foreclosures, but a report by bank regulators says that more than half of borrowers who get help fall behind again. More than 50 percent of homeowners with loans modified in the first half of last year had missed at least two months of payments a year later, the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision said yesterday. But the results were better among those whose payments dropped substantially. About one in three borrowers whose monthly payments were reduced by 20 percent or more had fallen behind again within a year. Among borrowers whose loan payments were left unchanged or increased, more than 60 percent had fallen behind again. The report highlights a significant challenge for the Obama administrations plan to tackle the foreclosure crisis, backed by $50 billion in money from the financial-industry bailout fund. The administrations effort got off to a slow start, but it has picked up speed in recent months. As of last month, about 360,000 borrowers, or 12 percent of those eligible, have signed up for three-month trial modifications. They are supposed to be extended for five years if the homeowners make their payments on time. There is no data yet on redefaults within the plan. Traditionally, most lenders have offered payment plans that allowed borrowers to catch up on missed payments. But those modifications often do not involve an interest-rate reduction, so they result in a higher monthly payment.
What Needs to Happen? (3 R’s)23 Revitalization Not just neighborhood stabilization – need long term reinvestment to revitalize hard hit neighborhoods Reinvestment, land banking
What Needs to Happen? (3 R’s)24 Reform: Economic empowerment for all must progress on multiple fronts Fair and sustainable housing -- integration into opportunity Fair and sustainable access to credit (manage debt) Fair banking and financial products (build assets) Ensure that programs and policies responding to the subprime crisis reach those most affected
To Learn More about the Kirwan Institute: www.kirwaninstitute.orgFor more informationabout the racial impactsof the foreclosurecrisis, visit our http://www.kirwaninstitute.org/events/archivconvening web site at: e/subprime-convening/index.php Questions or Comments?