Housing crisis hits Blacks the hardest

http://www.cnn.com/2010/LIVING/10/19/inam.housing.foreclosure.money/index.html?hpt=T2

CNN's Soledad O'Brien looks at how some are fighting debt from the pulpit in "Almighty Debt: A Black in America Special," premiering at 9 p.m. ET on October 21.

(CNNMoney.com) -- The foreclosure crisis has hit blacks harder than any other group in America and it will be tough for them to regain their footing in the housing market.

Blacks' homeownership rate has plummeted nearly 6 percent to 46.2 percent since its peak in 2004. That's more than twice that of any other racial or ethnic group, as well as the nation's rate as a whole, which fell only 2.3 percent, according to U.S. Census data.

Also, among recent borrowers, nearly 8 percent of blacks have lost their homes to foreclosure, compared to 4.5 percent of whites, according to the Center for Responsible Lending. Latinos, who have also been pummeled by the mortgage meltdown, came in a close second behind blacks in foreclosure losses.

The consequences are devastating. Fewer blacks own their home now than any other racial or ethnic group and that makes it even more difficult for them to achieve financial security and attain wealth.

"We built the middle class on homeownership," said Marc Morial, head of the National Urban League, which works to empower the black community. "How many people have built their business with the equity in their home? How many people have sent their kids to college with the equity in their home?"

The loss of homeownership is more than the difference between a mortgage payment and a rent check, experts say. Purchasing property is the key to building wealth, which not only allows people to improve their quality of life and provide more for their children, but also gives them a cushion during tough economic times.

CNNMoney: Foreclosures: Next to hit banks?

"Billions and billions of dollars were stripped away from a community that already had lower levels of wealth than white communities," said Debbie Bocian, senior researcher at the Center for Responsible Lending, which estimates blacks will lose $194 billion in wealth through 2012 due to the mortgage meltdown. "It exacerbates all the socio-economic divides. The consequences are intergenerational."

Subprime lending and unemployment

During the housing boom, nearly seven in 10 Americans owned their home, a gain of 7.8 percent from a decade earlier. Black Americans saw their home ownership rates rise twice as fast to 49.1 percent, thanks in large part to easy credit.

But many of those new mortgages -- which often came with low teaser rates that would adjust upward after two or three years -- would prove unaffordable.

Overall, blacks were 150 percent more likely to get high-cost loans, according to the Center for Responsible Lending. Even when they had similar income and credit scores as white borrowers, blacks were about 30 percent more likely to be steered to expensive mortgages.

When home prices started to fall, borrowers found themselves trapped in subprime loans. And since so many people in the black community had these mortgages, they suffered disproportionately in the early stages of the mortgage meltdown.

Now, the foreclosure crisis has now expanded beyond the subprime market. More and more people with stronger credit backgrounds and more stable mortgages are defaulting on their loans because they've lost their jobs.

CNNMoney: Embattled homeowner to bank: You don't own my loan

But here too, blacks are at a disadvantage. Black unemployment stood at 16.1 percent in September, the highest of any group and 6.5 percentage points above the national average.

"The unemployment rate in the African-American community is sky high," said Chris Herbert, research director at the Joint Center for Housing Studies at Harvard University. "That's certainly behind their high foreclosure rate."

Tight credit going forward

It's tough for anyone to get a mortgage these days. But it's even more difficult if you are black.

Nearly one-third of blacks were denied loans in 2009, compared to 13.1 percent of whites and 25.6 percent of Latinos, according to federal data released last month. The disparity can't be explained solely by differences in applicants' incomes and loan amount requested. Even when these factors are the same, blacks are still twice as likely to be turned down, a Home Mortgage Disclosure Act report found.

Nearly 49.8 percent of blacks had their refinance applications rejected, compared to 21 percent of whites and 41 percent of Latinos.

These stats mean that many blacks can't shift into lower-cost mortgages in order to save their homes, nor can they purchase their first property and boost homeownership rates.

CNNMoney: After foreclosure: How long until you can buy again?

"Credit constraints are a real concern," Herbert said. "While there is a need for tighter underwriting standards, we have to be careful not to go too far and unnecessarily limit access to credit that helps families manage their finances and build wealth."

One solution that the National Urban League is pushing is more homebuyer education programs. First-time purchasers who go through a course that teaches them about budgets, debt, home maintenance costs and risky, expensive loans are less likely to default, experts say.

"We need a fundamental commitment to housing counseling to prepare people to become homeowners," Morial said.

http://www.cnn.com/2010/LIVING/10/19/inam.housing.foreclosure.money/index.html?hpt=T2

Liberty City Mortgage Meltdown

Read more: http://www.miamiherald.com/2010/10/18/v-fullstory/1879950/house-homeowner-caught-in-a-mortgage.html#ixzz12pOH09nh

THE FORECLOSURE CRISIS
House, homeowner caught in a mortgage meltdown

A Liberty City woman is fighting foreclosure, claiming forgery, fraud and bank negligence in a drama that has her family home at stake.
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By TOLUSE OLORUNNIPA
tolorunnipa@MiamiHerald.com

Ten people spanning three generations share a single bathroom in what's left of Annie Edwards' crumbling home in Liberty City. There are holes in the wood floors and trash bags plastered to the leaking ceiling -- and Deutsche Bank is adamant that it wants this 82-year-old structure.

It has been fighting to repossess the home since 2006 in an ongoing legal battle that involves allegations of forged signatures, a disbarred property appraiser and a family on the brink of homelessness.

The house is indeed a wreck, but because it has a Fannie Mae-backed mortgage, the bank could simply carry out foreclosure proceedings, and then put in a claim to recoup the $102,000 owed on it. Because Fannie Mae was taken over by the federal government in 2008, taxpayers would ultimately pick up the tab.

``It's really a sad case,'' said Jonathan Heller, a lawyer who volunteered to defend Edwards from foreclosure. ``She worked for 30 years, had no mortgage on the property, is in a wheelchair and every night she goes to sleep thinking, `Am I going to have this house when I wake up?' ''

Edwards' predicament represents a confluence of the fraud, document forgery, and suspicious foreclosure practices that have plagued South Florida's housing market from the housing boom after Hurricane Wilma in 2005, through the current ``robo-signing'' scandal. In the midst of a new national foreclosure crisis, Edwards' story stands out as a case study of the housing and banking systems' laundry list of problems.

The 63-year-old retiree says her housing troubles began five years ago when her ex-husband, legally blind and illiterate, was duped into taking out a $102,000 mortgage on the house by his adult son and daughter-in-law. The couple forged Edwards' signature on a document that stripped her possession of the home, and then made off with the money in January 2006, she said.

SERVING PAPERS

Four months later, a bank representative came to the shotgun-style house to serve foreclosure papers, surprising Edwards so much that she filed a police report. The retired Jackson Health System nurse's aide had owned the home free and clear for years, and knew nothing about a new mortgage.

``To my knowledge, the house is only worth maybe $30,000 to $40,000,'' she said. ``Why would someone, a bank, loan out $100,000 on a place that's only worth $30,000 or $40,000?''

Valued by Miami-Dade County's property appraiser at $34,883 in 2005, the home's assessment shot up to $234,581 after the loan was made in 2006. By 2010, the property's assessed value had fallen to $112,459, with $97,808 for the building and the rest for the land it sits on.

Another question Edwards is asking is why the bank is fighting so hard to foreclose on her dilapidated home, which nonprofit homebuilder Habitat for Humanity has declared unlivable.

Heller believes the bank doesn't actually want the physical building, which would be a tough sell even in a good market, but is after the government guarantee tied to it.

A spokesman for Deutsche Bank declined to comment on Edwards' case, but said the bank acts as a trustee, and is simply carrying out the intentions of the loan servicer, Argent Mortgage Co. According to court records, the mortgage was transferred to Deutsche Bank in 2006.

Heller said Argent, the original lender, is partially at fault because it did not properly review the paperwork and lent $102,000 on a broken property that was never worth that much.

Another wrinkle in the story: If Edwards can beat this foreclosure, her home will be completely rebuilt by Habitat for Humanity, at no cost to her.

The Greater Miami chapter of Habitat has approved the property for an extreme makeover through a program for homes affected by hurricanes Katrina and Wilma.

``We've done an assessment of the home -- it definitely is a rebuild,'' said Anne Manning, executive director of Habitat for Humanity of Greater Miami . ``We'd knock it down and build it back up.''

In the years since hurricanes lashed her home, Edwards said she has been hesitant to use the little money that she has for repairs, because the bank is looming to take the home away.

``I wanted to fix up the place but I can't do that,'' said Edwards, who lives on Social Security and a retirement check. ``I'm afraid that someone might come in and try to take the place. Then after I put all the money in it, it'll go to waste.''

And Habitat can't remake the home unless Edwards can clear up the foreclosure problem.

``This is a family we really want to make sure we can help,'' said Manning, pointing out that two special needs children live at the house. ``Our hope is that she can straighten everything out with the title, and Ms. Edwards would get a brand new home.''

Meanwhile, Edwards is bearing the consequences of the $102,000 loan through higher property taxes. Her property tax bill, which stood at $638 before the loan, soared to more than $4,300 last year.

Argent Bank's property appraiser, who valued the home at $120,000 shortly after mid-decade hurricanes had their way with the roof and frame, had his license revoked 10 months after filing his appraisal report. That report -- which failed to mention the structural deterioration or storm damage -- stated: ``No physical deficiencies or adverse conditions were noted that would adversely effect [sic] the livability, soundness or structural integrity of the subject property.'' The appraiser's license revocation report from the Florida Real Estate Appraisal Board lists ``knowingly making a false statement,'' and ``engaging in fraud'' among its charges.

Tamika Terry, who grew up in the home and lives there with her two children, said the idea that a bank would loan $102,000 on such a derelict property was ``crazy -- real crazy.''

On a tour through the home, Terry, Edwards' daughter, pointed out deteriorating fixtures while dodging weak sections of the wood floor. Her own daughter's wheelchair leaned against a cracked wall, and flies buzzed in and out of the many holes in the structure.

``This house was built in 1928,'' Terry said. ``It's never been remodeled.''

SUSPICIOUS?

Using a dishonest property appraiser was only one of many suspicious actions by Argent Mortgage, Heller alleges. The loan approval process was also questionable, he said.

The loan application claims Edwards' ex-husband, Kenneth Edwards, was an ``owner-occupier,'' of the home, though he hadn't lived there for 10 years and public records shows he bought a separate homesteaded property in 1996. The bank never checked and, according to Kenneth Edwards, never asked.

In a sworn affidavit, he states that he never spoke to any bank representatives before the loan was made.

Argent, at one point the nation's largest lender to people with low credit scores, crumbled under the weight of the subprime lending crisis and was sold to Citibank in 2007. A previous Miami Herald review of Argent mortgages found widespread evidence of mortgage fraud, with one-third of Argent loans in Miami-Dade County eventually falling into foreclosure.

According to Annie Edwards' counterclaim, the lender also relied on a forged quit-claim deed that stripped her of her ownership. A police report found her signature on that document was a forgery, the counterclaim states.

If the forgery defense is accepted in court, that would make the loan, and the foreclosure, legally invalid.

For her part, Annie Edwards puts most of the blame on her stepson and his wife, since they obtained a loan without her knowledge and never paid the mortgage. She hasn't heard from either one of them since.

The stepson, David Edwards, lives out of state, and his wife, Dana, lives in Broward County, Heller said. Neither could be reached for comment.

FAMILIAR PROBLEMS

As Deutsche Bank motions for a summary judgment in the case, it suffers from many of the same problems that have led to stalled foreclosures across the country.

After acquiring the loan from the original lender, the bank's representatives profess little knowledge about the details of the home loan, and its lawyers have not been able to close the case for four years.

A Miami-Dade County judge briefly threw out the case in July after a Deutsche Bank attorney failed to show up in court. Another judge reinstated the case a month later.

Heller hopes to take the matter to trial, and eventually have the foreclosure ruled unlawful. He also filed a counterclaim for wrongful foreclosure.

In the meantime, the Edwards family has been looking into other housing options should the bank succeed in foreclosing. The 63-year-old matriarch said she hopes it doesn't come to that.

``The only thing I can do if they continue to try to take this house is to move,'' Annie Edwards said. ``And I have no place to go.''

Read more: http://www.miamiherald.com/2010/10/18/v-fullstory/1879950/house-homeowner-caught-in-a-mortgage.html#ixzz12pOH09nh