In a recent speech before the Operation HOPE Global Financial Dignity Summit in Atlanta, Ben Bernanke, chairman of the Federal Reserve, warned that the current housing recovery is leaving communities of color behind.
In his remarks, he acknowledged that racial discrimination in housing persists despite federal fair housing laws and the Community Reinvestment Act.
“Two types of discrimination continue to have particular significance to mortgage markets.” said Bernanke. “One is redlining, in which mortgage lenders discriminate against minority neighborhoods, and the other is pricing discrimination, in which lenders charge minorities higher loan prices than they would to comparable non-minority borrowers.”
Dr. King’s legacy
He added, “I am reminded here that fair treatment in housing was a significant focus of Dr. [Martin Luther] King’s and the Fair Housing Act of 1968 – still one of the nation’s cornerstone laws to prohibit discrimination – was passed only a week after his assassination and stands among his legacies.”
Despite that historic legislation, from 2004 to 2012 African-American homeownership fell more than double that for other racial groups, and the number of home-purchase loans among African-Americans and Hispanics dropped more than 65 percent. By comparison, lending to non-Hispanic Whites fell during these same years less than 50 percent.
Nationwide, the current homeownership rate stands at a 15-year low.
The Fed chairman’s conclusions underscore recent independent housing research by the Center for Responsible Lending (CRL).
The report titled, “Collateral Damage: The Spillover Costs of Foreclosures,’’ measures losses in property values suffered by families who live near foreclosed homes.
CRL found that among the 10.9 million homes that went into foreclosure between 2007 and 2011, more than half of the “spillover” costs were borne by African-American and Latino families – a loss amounting to approximately $1 trillion.
Gaps in literacy
While Chairman Bernanke called for consumers to become more financially informed, CRL cautions that efforts to strengthen consumer education should never substitute for fair policies. There will always be gaps in financial literacy, but sound policies can help ensure better and more sustainable opportunities for families to build wealth.
Now, while the Consumer Financial Protection Bureau (CFPB) moves towards finalizing key mortgage reforms, CRL has publicly posed an important question: How will these policies affect homeownership opportunities for lower- and middle-income families who bore the brunt of the recent crisis?
Consumers concerned about these issues can stay informed and join the ongoing conversation on Twitter. CRL encourages Twitter users to participate in a growing online advocacy effort to fight for fair and affordable homeownership at www.homeville.us.
Once joining the Homeville community, be sure to use the hash tag #Homeville to encourage others to speak up about mortgages and homeownership.
In coming months, CFPB regulatory actions can become an opportunity to correct the multiple ills wrought by lending abuses and lax financial regulation.
As Chairman Bernanke said, “Our recovery must be broadly felt to be complete, and families and communities that were already struggling before the crisis must be included in that recovery.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.