Apr 4, 2011

After making big financial gains in recent decades, African Americans and Hispanics are again losing ground, critics say.

Rather than blaming the lingering effects of the recession, a growing number of reports point to financial discrimination as a major cause.

“Communities of color have received the worst treatment at a very high cost,” says Michael Calhoun, president of the Center for Responsible Lending (CRL). “We estimate 20% of African-American and Hispanic homeowners will lose their homes in this housing crisis,” more than twice as high as white households.

Homeownership is the primary engine of wealth, but the housing slump only partly explains the growing gap affecting minority families, says John Taylor, CEO of National Community Reinvestment Coalition (NCRC).

“It’s about a dual system of finance,” he says. “People of color do not have the same access that most American citizens enjoy.”

While most consumers are able to go to a full-service bank branch that offers an array of competitively priced products and services, minorities are disproportionately forced to go to payday lenders, pawnshops and high-cost mortgage lenders, Taylor says.

Those who live in minority neighborhoods — even middle-income families whose high credit scores could qualify them for a prime loan — are likely to be steered into a subprime loan, says Hilary Shelton, NAACP’s senior vice president for advocacy and policy.

Josephine Wiles-Warner didn’t think that she would become a subprime casualty statistic when she bought a home in Herndon, Va., in 2000 as she sought to provide security and good schools for her family.

“That is what this nation is about,” says Warner, 57, a single working mother who is raising five adopted children while she pursued dual graduate degrees in project management and information systems.

She had needed to refinance her mortgage when she took time off from work in 2006 to go to Liberia for her mother’s funeral. Countrywide Financial offered her a subprime loan that Warner later found out she couldn’t afford.

When Countrywide was close to filing for bankruptcy protection, another lender took over her loan, and her payments continued to spiral out of control until she got a foreclosure notice.


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