The Blacks Have Been Worst Hit by the Foreclosure Crisis

Posted on January 16th, 2012

Photo by Woodleywonderworks

The Blacks have been worst hit by the foreclosure crisis. Many accusing fingers point at Community Reinvestment Act (CRA) that bans any form of redlining. The CRA stipulates that financial institutions find out and accordingly respond to the credit requirements of all in the regions within their jurisdiction, including those in the low to middle-income group. Accordingly they mandated to resort to sound lending practices that are safe.

According to Federal Reserve a mere 6% of highly toxic sub-prime loans made to those in the low to middle-income group originated from lenders that came under CRA. The bulk of these loans were contracted by financial institutions not covered by this law.

According to Center for Responsible Lending nearly 8% of the Blacks and Hispanics have seen their homes swallowed by foreclosure; in comparison 4.5% Whites have been affected. As per the estimates of United for a Fair Economy one third of Black families and 40% of the Hispanics are facing the danger from sliding down from the middle-class to the poor category because of the foreclosure triggered economic crisis.

Why was there this concentration of toxic loans and subsequent foreclosures in areas resided by the minorities? In Louisville at least the blame lies with the investors – primarily white speculators. They did not reside in these localities.

Research conducted by John Gilderbloom and Gregory Squires has found that in each of the years of 2007 and 2008 there were 2,000 foreclosure auctions. It measured to 39 foreclosures per census tract resided by Blacks and 20 resided by Whites.

In the Black area the count was 15 units owned by the investors experienced foreclosure while in the White area it was 2 units. Most of the foreclosed houses in Black localities were owned by Whites who resided far away from these places.

In Black areas the culprits were mostly the White investors seeking quick profits. Louisville is not the exception but rather the rule. It stands right in the middle of the chaos. It ranks 103 among 203 metro regions in recent foreclosure ratings.

There are many factors behind why a property is foreclosed upon and why the rates differ from one region to another; race is one of the reasons but not the only one. The other variables that fuel foreclosure – crime, property values, family earnings, levels of income, vacancies and toxic loan numbers, are the same for all communities, White or Black. But where the investor factor was isolated race did play an important part.

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The Blacks Have Been Worst Hit by the Foreclosure Crisis

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