Why African Americans are in desperate need of mortgage help

By respresĀ  by Wikipedia Commons
Respres /Wikipedia Commons

Buying a house or a piece of property to call your own is part of the American Dream. But if you’re African American, that dream is becoming further and further out of reach.

Whether you’re a renter trying to buy your first home or a homeowner looking for a modification to avoid foreclosure, it has become more difficult than ever to get approved for a loan and just as challenging to understand the nuances of what lenders are looking for.

For African Americans, the mortgage landscape is particularly harrowing. According to sociologists from Rice and Cornell Universities, African Americans are 45 percent more likely than Whites to go from owning their homes to renting them. There are many factors contributing to this startling statistic. Among them:

  • African Americans are more likely to lose their homes to foreclosure.
  • African Americans have been more targeted by predatory lenders.
  • African Americans have less wealth to put toward homeownership in the first place.

During the Great Recession, between 2007 and 2010, wealth for Blacks dropped by an average of 31 percent, home equity dropped by 28 percent and retirement savings dropped by 35 percent. During that same period, Whites lost only 11 percent in wealth, 24 percent in home equity and actually gained nine percent in retirement savings. So are African Americans destined to fall further behind? Not if they are aware of the statistics and trends and how to overcome them.

For example, in inner cities, conveniently located houses will go to non-minority people who can afford the down payment and have excellent credit. Meanwhile, African Americans will be pushed further and further out, making it increasingly difficult to get to work, while getting stuck with sky-high rents and slum landlords.

Already, Wall Street investors have bought thousands of foreclosed homes once owned by African Americans. They are now the owners and we are the renters. This is the scheme. Rents are predicted to go up 20 percent per year.

To make matters worse, when investors sell the properties, African Americans are not the buyers. The mortgage approval requirements are exceedingly high. Today, the average mortgage denial has a 722 credit score. The average score for the people we serve is 630. Since 96 percent of African American wealth is in our homes, we lose.

While these statistics and trends are grim, they are certainly not insurmountable. With goal-oriented financial education and information, thousands of homeowners have achieved their financial goals in recent years. Not only that, but many families have achieved zero percent foreclosure rates ā€” a remarkable feat in the recent economy.

Here is some valuable information that could lead in that direction:

  • Remember, the mortgage industry is in business to make lots of money by any means necessary. The less you know, the fewer your options and the more you can be taken advantage of.
  • Nonprofit counseling and credit assistance for distressed homeowners and prospective homebuyers are available but rarely marketed. A lot of this is valuable, free information from experts in mortgage and credit fields.
  • In many states, there is government home-buying money that goes unused. This money is also not marketed. Call your Department of Housing as soon as possible.
  • Limit the financial information you get online. Speak to a professional over the phone or in person so you can check out their credentials.
  • Without some guidance and information the mortgage process can be confusing, difficult and misleading. Make one wrong decision and thousands of dollars can be lost. So get the information you need.

Ā Marcia Griffin is founder of HomeFree-USA, a leading intermediary for the U.S. Department of Housing and Urban Development.