Minorities and Foreclosure

[Jun 5, 2008.]

 

While the foreclosure crisis is affecting an array of people studies are showing that a particular type of mortgage loan is bearing the brunt of the collapse.

Sub prime adjustable rate mortgages appeal to many for their initially low interest rates. The initial interest rates are set for a prearranged amount of time before being subjected to rate changes due to a variety of indexes.

The sub prime adjustable rate mortgages adjust to current interest rates after a period of time and are often times much, much higher then the initial amount making it impossible for many home owners to meet the payments on time. As a result these homeowners go into default and loose their home in foreclosure procedures.

Companies that offered sub prime adjustable mortgages were the first to collapse at the start of the housing market collapse.

Recent reports by several advocacy groups have revealed that certain mortgage companies targeted minority and low income neighborhoods using attractive sub prime adjustable rate mortgages, which would then adjust at rates that would make it impossible for these homeowners to continue making the payments.

Reports show that over 20% of these mortgage companies high risk loans were located in minority neighborhoods.

"These high risk lenders were targeting their loans to particular neighborhoods" stated Saara Nifici who is a part of the Neighborhood Economic Development Advocacy Project in New York.

This new casts a dark shadow on the already bleak housing market casting many sub prime lenders' practices in question. A geological survey of sub prime lenders and the neighborhoods where they were dominant certainly backs up the claims by these advocacy groups.

While not all sub prime lenders are to blame, it certainly seems that a portion of these companies initially targeted low income and minority neighborhoods. Recently the city of Baltimore filed a lawsuit against Well Fargo Bank who they claim sold high interest mortgages to minorities more than to whites.