California Rep. Joe Baca has long pushed legislation he said would “open the doors to the American Dream” for first-time home buyers in his largely Hispanic district. For many of them, those doors have slammed shut, quickly and painfully. Mortgage lenders flooded Mr. Baca’s San Bernardino, Calif., district with loans that often didn’t require down payments, solid credit ratings or documentation of employment. Now, many of the Hispanics who became homeowners find themselves mired in the national housing mess. Nearly 9,200 families in his district have lost their homes to foreclosure. For years, immigrants to the U.S. have viewed buying a home as the ultimate benchmark of success. Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster, increasing by 47%, to 6.1 million from 4.1 million, according to the U.S. Census Bureau. Over that same period, homeownership nationally grew by 8%. In 2005 alone, mortgages to Hispanics jumped by 29%, with expensive nonprime mortgages soaring 169%, according to the Federal Financial Institutions Examination Council. Share on Facebook
SOUTH SAN FRANCISCO, Calif. – Naira Costa, a 27-year-old housekeeper, met her husband at Message of Peace, an evangelical church that is a spiritual and social haven for Brazilians in the Bay Area. When the couple considered buying a house a few years ago, the church’s head deacon, Soario Santos, ministered to that need, too. Mr. Santos, a fellow Brazilian, served the Pentecostal church on nights and weekends. During the day, he worked as a loan officer at a mortgage brokerage owned by a Brazilian immigrant. Mr. Santos and other church officers also working at the same real-estate business routinely approached churchgoers to encourage them to buy homes. Weak credit and low wages weren’t barriers, Ms. Costa recalls. “He told us that a house easily would appreciate $100,000 in a year,” enabling the owner to refinance, says Ms. Costa. “We trusted him implicitly. Everyone at the church was buying houses from him.” Share on Facebook
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The economy isnâ€™t the villain. GDP growth in the first quarter of 2007 was above two percent and the unemployment rate (4.7 percent) continues to be low, all of this despite the blow to the financial sector.
How do we know foreclosures are essentially related to subprime loans? An inspection of foreclosures listed on the net provides that answer.
In Essex County, for example, 510 foreclosures are listed. Not all carry sales values, but itâ€™s informative to study the 344 that do.
Geographically, 55 percent are located in Lynn and Lawrence; 18 percent, in Haverhill and Salem; eight percent, in Methuen and Peabody; Amesbury, Beverly and Danvers have nine percent. All other locations in Essex County — the richest ones — account for 10 percent of the total.
Those with limited income and a choppy credit background seek the subprime loan. So it is no surprise to find that the preponderance of foreclosures comes from the low-income communities.
In terms of size, 8 percent of foreclosures carry a sales value above $300,000; 52 percent over $200,000 and 39 percent under $200,000.
This data makes the point once again that subprime loans are the villains, loans that would never have been made as little as a generation ago.
When and why did lending practices change? Who was behind it?
There may be several explanations, but in reviewing the data one name keeps coming to the forefront — Rep. Joseph P. Kennedy II.
Writing in the July 14, 1989, National Review, Susan T. Mandel noted, â€œSniffing out â€˜discriminatoryâ€™ lending practices has been one of Kennedyâ€™s top legislative priorities since he came to Congress in 1987. â€¦ Mr. Kennedyâ€™s voting record (is) one of the most liberal in the House.â€
Several 1989 studies suggested that bank lending practices were prejudiced against blacks.
There was no denying that minority applications for loans were turned down more frequently, but realists recognized that this was mostly due to disparity in income. Those who chronically play the ethnicity card, however, ever on the alert to find instances of discrimination, pounced on the statistics and charged banks with racism.
Joe Kennedy jumped into the middle of this morass and added his voice and his power to charges being made. And before he was through, an amendment was tacked onto a savings-and- loan bill that changed forever the way loans are made.
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