TheLoop21.com

By: Elena Shore, New America Media (Add to your loop)
Wed, 06/24/2009 - 00:00

The housing crisis is hurting the progression of black wealth.

After the largest growth in homeownership in history during the last 15 years, blacks and Latinos are now suffering their largest loss in wealth in modern history. And that erosion of wealth could lead to a second collapse in the national economy within a year.

This was the core message of a white paper released this month by the William C. Velasquez Institute. The report describes how this lost wealth — more than $200 billion during the last three years — could impede the economic recovery of the entire country if it is not addressed.

“What we found was, quite frankly, much more dramatic than any of us thought it would be,” said Albert Jacquez, of Strategic Solutions Washington, and a co-author of the study.

Latinos and African Americans were 230 percent and 270 percent respectively more likely to get subprime loans. Nine million home foreclosures are predicted in the next two years and are expected to fall disproportionately on new black and Latino homebuyers, particularly in states like California, Texas, Florida and Arizona.

But here's where others come in. Baby boomers will soon be net home sellers, not homebuyers, said Jacquez. The demographics show the new homeowners will be Latinos, blacks and Asians. But without reforms, they may not be in a financial position to take advantage of this opportunity.

“The secret is that we are by no means out of the foreclosure crisis,” said Raul Hinojosa Ojeda, an instructor at UCLA and another co-author of the paper. “All of the policies at the state and federal level are a fraction of what’s needed.”

The Obama administration has not done enough to address this crisis, Hinojosa Ojeda said. The administration’s relief only affects 100,000 families, which he called "a drop in the bucket."

"The problem is that if you have a regulatory reform when your foundation is still crumbling, it is really not going to make a difference," he said.

The report, The End of the American Dream for Blacks and Latinos, proposes policies to modify mortgage terms to help homeowners avoid foreclosures, provide a homebuyer’s tax credit that can be applied to down payments on new homes, and make available sustainable mortgages and refinancing for a new generation of homebuyers.

The idea is that these programs would have an effect similar to those of government programs created in the 1930s, which helped reverse low homeownership rates during the Great Depression. Then, the programs helped make it possible for an entire generation of working-class people to buy homes. “The problem is 98 percent of those products went to white families,” Hinojosa Ojeda said. “Blacks and Latinos were kept out.” What has to happen now, he said, is to create a new pathway for working-class and emerging middle-class families.

Researchers say the cost of doing nothing could be profound. “If we do not stop the impending mountain of foreclosures which are coming down the pike,” Hinojosa Ojeda said, “we could really arrest the progress that the United States has had over the last 50 years in maintaining itself as a middle-class country.”

This story was originally published by New America Media.

Should Black America support Arizona's immigration law?

Yes, Latinos are racist against Blacks

Maybe, if it begins to affect us

No, it is discrimination

I don't know

It's not my problem