Subprime Lenders: We Have a Scheme

The racial back-and-forth since Sen. Hillary Clinton and Sen. Barack Obama left the "prodigious hilltops of New Hampshire" is a reminder that the Rev. Dr. Martin Luther King Jr.'s dream that his "four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character" is still just that: a dream.

To commemorate Dr. King's actual birthday, United for a Fair Economy, a nonpartisan economic justice organization, has released "Foreclosed: The State of the Dream 2008," a report on the subprime mortgage crisis that has turned the American Dream of homeownership into a nightmare.

African Americans disproportionately rely on subprime mortgages, which are made to borrowers who do not qualify for a fixed-rate mortgage due to their weak or limited credit histories. Subprime lenders offer low-interest "teaser" rates that reset to higher adjustable mortgage rates.

According to United for a Fair Economy, the subprime mortgage crisis will lead to a net loss in black homeownership. The bottom line: The subprime crisis "will cause the greatest loss of wealth for African Americans in modern U.S. history."

The report's key findings include:

Our estimates indicate that it will cause the greatest loss of wealth for African-Americans in modern US history.

People of color are more than three times more likely to have subprime mortgages.
Blacks, who represent roughly 13 percent of the U.S. population, got 54.7 percent of all subprime mortgages issued nationwide.
The total loss of wealth for people of color is between $163 billion and $278 billion for subprime loans taken out since 2000.
African American borrowers will lose between $71 billion and $122 billion.
It will take 594 years to close the racial gap in median household net worth.

At the 11th annual conference of the Wall Street Project, Texas state Sen. Rodney Ellis said: "People who thought they had moved on up now find they are moving out."

But the subprime mortgage crisis is more than a family crisis. The increase in foreclosures depresses property values, and lowers local and state revenues. Black neighborhoods are particularly vulnerable given the concentration of subprime mortgages. So, cities, including Baltimore and Cleveland, have filed lawsuits to recover the additional maintenance, police and other costs associated with vacant houses.

Investigations are also underway in Illinois and New York over allegations the subprime mortgage crisis was triggered by white-collar crimes. Indeed, the Rev. Jesse L. Jackson, Sr., founder and president of the Rainbow PUSH Coalition, has called for a congressional investigation on the "subprime crime crisis" that is "consuming the global economy."

In the meantime, free counseling is available at Hope Now for homeowners facing foreclosure.