THE HOUSINGCRISIS, FORECLOSURES AND RACEStephen MenendianSenior Legal Research AssociateKirwan Institute for the Study of Race & EthnicityThe Ohio State University Ohio Organizing Collaborative Housing Summit Columbus, Ohio July 29, 2009
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
Foreclosure Outlook: RateResets Monthly Mortgage Rate Resets (in billions of dollars)Source: Credit Suisse Slide Adapted from Presentation by: Solomon Greene, 5 Open Society Institute, Neighborhood
Foreclosures and Race 6 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. 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. While these tracts contain almost 40% of foreclosure filings, they house only 19% of the county’s total population. 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 athttp://www.clevelandfed.org/Our_Region/Community_Development/Publications/Behind_the_Numbers/2008/0908/ALBTN_V1_I1.pdf Nelson. “Foreclosure Filings in Cuyahoga County.” Page 5.
8Why is the foreclosure crisis inOhio highly racialized? -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 8
Cleveland: Subprime Loans and Foreclosure10 Maps: Produced and adapted from Charles Bromley, SAGES Presidential Fellow, Case Western University
Subprime Loans11 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
Racial Disparities in Lending12 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. Source: Persisting Racial and Ethnic Disparities in Ohio Mortgage Lending, Housing Research and Advocacy Center
Historical Policies Contributing to Residential Segregation and16 Isolation 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
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 17
Institutionalized Disinvestment:Redlining Map of Philadelphia 18
The Rise of Suburbia:But not accessible to everyone 19 In the suburb-shaping years (1930-1960), less than one-percent of all African Americans were able to obtain a mortgage.
N African American PopulationW E S in Franklin County by Census Tract 1970 Prepared by: Kirwan Institute for the Study of Race & Ethnicity Date: 10/13/05 Source: Census, NCDB Legend: Columbus Public School District Highways % African American 0 - 5% 5 - 10% 10 to 25% 25 to 50% 50 to 100%
N African American PopulationW E S in Franklin County by Census Tract 1980 Prepared by: Kirwan Institute for the Study of Race & Ethnicity Date: 10/13/05 Source: Census, NCDB Legend: Columbus Public School District Highways % African American 0 - 5% 5 - 10% 10 to 25% 25 to 50% 50 to 100%
N African American Population W E S in Franklin County by Census Tract 1990 Prepared by: Kirwan Institute for the Study of Race & Ethnicity Date: 10/13/05 Source: Census, NCDB Legend: Columbus Public School District Highways % African American 0 - 5% 5 - 10% 10 to 25% 25 to 50%22 50 to 100%
N African American PopulationW E S in Franklin County by Census Tract 2000 Prepared by: Kirwan Institute for the Study of Race & Ethnicity Date: 10/13/05 Source: Census, NCDB Legend: Columbus Public School District Highways % African American 0 - 5% 5 - 10% 10 to 25% 25 to 50% 50 to 100%
24 Residential Segregationo Communities of color and o People in these communities low-income communities were subject to sub-par were physically, socially and lending from rent-to-own, to economically segregated payday lenders, to check from prime credit markets. cashing places that all charged exorbitant interest rates. And finally…subprime home loans
From Redlining to Reverse Redlining: A historical view of redlining zones in Philadelphia and areas of foreclosure in minority communities.25
Impacts26 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
Social Justice and Housing:A Web of Challenges Exclusionary Subsidized Housing Zoning Policies Racial Housing Challenges A Housing Market Discriminatory That Does Not Serve And Unfair Lending the Population Racial Steering And Discrimination
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?
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