Everyone's Feeling Economic Pain, But It's Hitting Minorities Worst of All
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As soon as he told her they wouldn't be able to pay the mortgage, Ruben Loera's wife's heart clenched. She started packing away the angels and pulling down the paintings. Five months later and one step away from foreclosure, half-empty boxes are piled in a corner of the living room in their home in Maryvale, a suburb of Phoenix, Arizona.
Loera had been hearing tales of people losing their houses, but he never thought it would happen to his family. "I had to make a decision: I pay the house, or I feed my kids," said Loera, who migrated legally to the United States from Mexico almost 30 years ago and has a daughter and a son, ages 17 and 11.
Loera's story is common these days. Although many families are experiencing foreclosures, job losses and increased debt, community advocates say that Latinos and Blacks are feeling the effects most acutely. These two communities are bearing the brunt of high unemployment rates, a disproportionate rate of receiving subprime mortgages and greater risk of foreclosures.
"People are getting hit from all sides," said Heidi
Shierholz, an economist at the Economic Policy Institute, a Washington-based nonpartisan think tank. "It's not just their income. Any wealth [that] families had is getting erased, too."
A United for a Fair Economy study released in 2008 estimated that the foreclosure crisis might strip as much as $213 billion in assets from Black and Latino households.
Loera bought his home in 2002. He had a perfectly good loan with a fixed interest rate until 2006, when he got a phone call from Countrywide Financial promising a great deal on a refinance. He was trustful, since it was the same company that gave him his first loan. "They told me it was money I earned that I wouldn't have to pay," he recalled.
He used the money to pay for his daughter's quinceaera party, a truck, and a sound system for the family's alabanzas, a band of inspirational songs for the music ministry at their Catholic church. It took only two months for him to realize he had made a big mistake. His monthly payment jumped from $1,000 to $2,000.
The family started eating up their savings and then began using their credit cards. When the housing bubble burst, Loera's $230,000 home depreciated to $180,000. At the end of 2007, he lost his job of 12 years driving a concrete mixer truck. He found another job as a painter with a commercial construction business but was laid off, along with 50 coworkers, last April. His wife's occasional work in children's daycare came to a halt, too.
With his credit cards maxed, Loera took a $2,000 high-cost loan using his car as collateral to pay for gas and groceries. He paid interest of $175 every 15 days but was unable to pay towards the principal. The $300 that Loera made working three days a week at a restaurant, along with other income from painting and handyman jobs, wasn't enough. He stopped paying the mortgage last May.
While Loera's situation, like so many others, unraveled quickly, housing advocates contend that the problems facing communities of color today have been brewing for the last decade. Blacks and Latinos "were targeted for the unfairness of the loan products that have literally poisoned the entire credit system now," said Jim Carr, chief operating officer of the National Community Reinvestment Coalition, a group of 600 organizations that promotes access to credit and affordable housing.
According to the 2007 Annual Minority Lending Report, about 47 percent of Hispanics and 48 percent of Blacks who purchased mortgages in 2006 got higher-cost loans, compared with about 17 percent of whites and Asians. The predatory lending that targeted minority communities has now resulted in "extreme geographic concentrations of foreclosures," said Jason Reece, a senior researcher at the Kirwan Institute for the Study of Race and Ethnicity.