Ohio Organizing Collaborative Housing Summit

Columbus, Ohio

July 29, 2009

THE HOUSING CRISIS, FORECLOSURES AND RACE

Stephen Menendian

Senior Legal Research Associate

Kirwan Institute for the Study of Race & Ethnicity

The Ohio State University

The Foreclosure Crisis2

A National Epidemic

An Epidemic

Foreclosures in Ohio were a pressing issue well before they became a national epidemic. 

Foreclosure filings have increased every year since 1995.[1]

As of June 2009, there was one foreclosure in Ohio for every  449 houses, and Ohio ranked 8th in the nation in foreclosure activity.[2]

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[1] Rothstein, David and Sapna Mehta. “Foreclosure Growth in Ohio 2009.” PolicyMatters Ohio, March 2009. Page 6.[2]Realtytrac, Accessed July 23, 2009 at http://www.realtytrac.com/trendcenter/default.aspx

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Ohio Foreclosure Totals: 1995-2008

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Foreclosure Outlook: Rate Resets

Source: Credit Suisse

Monthly Mortgage Rate Resets (in billions of dollars)

Slide Adapted from Presentation by: Solomon

Greene, Open Society Institute,

Neighborhood Stabilization Initiative

Foreclosures and Race

In Cuyahoga County, African Americans make up 74% of the population in the quartile with the highest rates of foreclosure, but only 3% of the population in the quartile with the lowest rates.[3]

½ of Cuyahoga County’s African American population lives in census tracts in the quartile with the highest rates of foreclosures, with 1/3 living in the tracts of the quartile with the second highest rate of foreclosure.[4]

While these tracts contain almost 40% of foreclosure filings, they house only 19% of the county’s total population.

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[3] Nelson, Lisa. “Foreclosure Filings in Cuyahoga County.” The Federal Reserve Bank of Cleveland. A Look Behind the Numbers 1(1).Fall 2008. Page 5. Accessed July 23, 2009 at http://www.clevelandfed.org/Our_Region/Community_Development/Publications/Behind_the_Numbers/2008/0908/ALBTN_V1_I1.pdf[4] Nelson. “Foreclosure Filings in Cuyahoga County.” Page 5.

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-Communities of color were historically starved of credit

-Lenders targeted communities of color with subprime loans

-Lack of loan information or understanding for consumers in many of these communities

-Mortgage securitization and the growth of the subprime industry created incentives to target new markets with mortgages

8Why is the foreclosure crisis in Ohio highly racialized?

Credit9

Cleveland: Subprime Loans and Foreclosure

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Maps: Produced and adapted from Charles Bromley, SAGES Presidential Fellow, Case Western University

Subprime Loans

About half of all subprime loans went to African American and Latino borrowers.

People of color were 30% more likely to receive subprime, even after factoring out financial differences.

30% of subprime borrowers qualified for prime loans

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Racial Disparities in Lending

Upper income whites received high cost loans only 10% of the time.

Upper income African Americans received high-cost home purchase loans 32% of the time in Ohio, compared to 20% of the time for low income whites.

For refinance loans, upper income African Americans received high-cost loans 38% of the time, compared to 26% of the time for low income whites.

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Source: Persisting Racial and Ethnic Disparities in Ohio Mortgage Lending, Housing Research and Advocacy Center

Columbus

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Connecticut

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Residential Segregation15

Historical Policies Contributing to Residential Segregation and Isolation

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Segregation as policy Jim Crow in the south

The Great Migration North FHA policies upholding segregation

Redlining, discouraging mixed race neighborhoods Blockbusting, racially restrictive covenants and

other forms of discrimination in the housing industry

Urban renewal, highway construction and public housing policy

Suburban sprawl and white flight

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Historical Government Role

“If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally contributes to instability and a decline in values.”

–Excerpt from the 1947 FHA underwriting manual

Institutionalized Disinvestment: Redlining Map of Philadelphia

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The Rise of Suburbia:But not accessible to everyone

In the suburb-shaping years (1930-1960), less than one-percent of all African Americans were

able to obtain a mortgage.

N

EW

S

African American Population in Franklin County by Census Tract 1970

Prepared by:Kirwan Institute for the

Study of Race & EthnicityDate: 10/13/05

Source: Census, NCDB

0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%

Highways

Columbus Public School District

% African American

Legend:

N

EW

S

African American Population in Franklin County by Census Tract 1980

Prepared by:Kirwan Institute for the

Study of Race & EthnicityDate: 10/13/05

Source: Census, NCDB

0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%

Highways

Columbus Public School District

% African American

Legend:

22

N

EW

S

African American Population in Franklin County by Census Tract 1990

Prepared by:Kirwan Institute for the

Study of Race & EthnicityDate: 10/13/05

Source: Census, NCDB

0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%

Highways

Columbus Public School District

% African American

Legend:

N

EW

S

African American Population in Franklin County by Census Tract 2000

Prepared by:Kirwan Institute for the

Study of Race & EthnicityDate: 10/13/05

Source: Census, NCDB

0 - 5%5 - 10%10 to 25%25 to 50%50 to 100%

Highways

Columbus Public School District

% African American

Legend:

Residential Segregation

o Communities of color and low-income communities were physically, socially and economically segregated from prime credit markets.

o People in these communities were subject to sub-par lending from rent-to-own, to payday lenders, to check cashing places that all charged exorbitant interest rates.

And finally…subprime home loans

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From Redlining to Reverse Redlining:A historical view of redlining zones in

Philadelphia and areas of foreclosure in minority

communities.

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Impacts

Communities of color further inundated with vacant properties

Mortgage applications for African Americans and Latinos dropped approximately 40% from 06 to 08 Compared to 19% for White’s

African American and Latino homeowners are expected to lose more than $250 trillion in assets due to the crisis Compounding the existing 900% racial wealth gap

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Social Justice and Housing: A Web of Challenges

Racial Housing

Challenges

Questions or Comments?

For more information about the racial impacts of the foreclosure crisis, visit our convening web site at:

http://www.kirwaninstitute.org/events/archive/subprime-convening/index.php

To Learn More about the Kirwan Institute: www.kirwaninstitute.org