Millions of families face foreclosures because they trusted lenders who offered new homebuyers only the riskiest and most expensive financing options.
For most American families, a home is their primary asset. This is especially true of low-income and minority families, for whom a home represents the single greatest opportunity to build wealth. But with recent subprime loan rates skyrocketing, communities of color are finding that the American dream remains out of reach.
Research from the Center for Responsible Lending predicts that one in 12 Latinos will be in foreclosure soon. For years, many organizations have warned lenders and policymakers that Latino and black families, even more than others, were not getting reasonable, effective home loans. More than 50 percent of the home loans to blacks are subprime. For Latinos, it’s 40 percent.
What’s needed is a moratorium on foreclosures for homeowners with the riskiest subprime loans. This moratorium would help families build financial security through homeownership and provide economic stability for neighborhoods nationwide. Congress and the mortgage industry could use this time to reform the untenable practices that have resulted in an alarming rise in foreclosure rates, especially for minority homeowners.
Some of these practices include passing over creditworthy Latino and black families for the best loans simply because they do not fit the industry’s traditional borrower profile. Or pushing families into loans that are more profitable and easier to process instead of connecting borrowers with available loans that meet their needs.
The mortgage industry must do its part to help those most vulnerable. Fortunately, some industry leaders recently announced plans to support foreclosure prevention counseling. Others are taking steps to make repayment plans available to borrowers in trouble.
But Congress also must act to prohibit deceptive and predatory lending practices. It should mandate that lenders issue loans that borrowers can afford to repay, and make mortgage brokers more accountable. Lenders should also be prohibited from steering creditworthy families to expensive, riskier loans.
The nonprofit counseling industry must gear up to meet the demands of families that face financial crisis. These providers know how to get safe and fair mortgages for working families and educate them on how to be responsible borrowers. Other community organizations, such as churches and social work groups, need to get involved in homeownership counseling.
Minority and low-income families have made gains toward achieving the American dream of homeownership. But predatory lending and foreclosures threaten to turn that dream into a nightmare for millions. Too many families are just one broken furnace away from losing their homes.
Source: origin1.montereyherald.com
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