AFRICANGLOBE – Helene Pearson’s belief in homeownership was shattered in Roseland, the mostly Black Chicago neighborhood where President Barack Obama got his start as a community organizer.
Pearson, who bought her two-bedroom, red-brick bungalow on South Calumet Avenue in Roseland for $160,000 in 2006 with a high-interest loan, put it on the market a year ago for $55,000 and didn’t attract a single offer. Her bank has agreed to take it back.
“I was so excited to buy my first house right down the street from my mother but they got me good,” said Pearson, a 35-year-old guidance counselor and mother of two girls. “This scarred me so badly that I never want to buy again.”
For most Americans, the real estate crash is finally behind them and personal wealth is back where it was in the boom. For Blacks in the U.S., 18 years of economic progress has vanished, with a rebound in housing slipping further out of reach and the unemployment rate almost twice that of Whites. The homeownership rate for Blacks fell from 50 percent during the housing bubble to 43 percent in the second quarter, the lowest since 1995. The rate for Whites stopped falling two years ago, settling at about 73 percent, only 3 percentage points below the 2004 peak, according to the Census Bureau.
When Obama, the country’s first Black president, took office in 2009, he inherited an economic and housing crisis that disproportionately affected minorities. In a speech last week on the 50th anniversary of Martin Luther King Jr.’s March on Washington, he called for expanding King’s dream of racial equality to include economic opportunity for all.
“Dr. King explained that the goals of African-Americans were identical to working people of all races: decent wages, fair working conditions, livable housing, old age security, health and welfare measures — conditions in which families can grow, have education for their children and respect in the community,” Obama said at the Lincoln Memorial in Washington.
In Roseland, among the hardest hit neighborhoods in the country during the housing bust, many of the causes of the crash and obstacles to rebuilding Black homeownership are found, according to Spencer Cowan, vice president of research at Woodstock Institute, a Chicago-based nonprofit group that researches fair lending, foreclosures and wealth creation.
Almost 40 percent of borrowers there took out high-cost loans in 2005 and 2006 as mortgage lenders backed by Wall Street targeted Black home buyers across the country for loans that required lower credit scores, reduced down payments, or featured interest rates that would start low and rise over time, contributing to an unsustainable bubble that popped when defaults rose and they cut off lending.
Now, almost one in 10 Roseland properties is vacant and the area’s homeownership rate fell to 57 percent in 2010 from 64 percent in 2000, according to the Woodstock Institute. The median home price meanwhile has dropped to $28,000 in the second quarter from $119,000 in 2005, according to Midwest Real Estate Data LLC.
The remaining homeowners, many of them elderly, live surrounded by vacant, boarded-up houses and gang violence that has led to 16 murders this year as of Aug. 30, which is a 30 percent drop from the same period in 2012.
Ernest Washington Jr., 63, bought his South Forest Avenue home for $25,000 in 1974 and had paid the mortgage down to $13,000. Now, after refinancing the house multiple times to finish the basement and make other improvements to the property, he owes $150,000 — about $20,000 more than it’s worth. His mortgage rate is 8.5 percent.
“Being that this was a stable community, what they did was put people in the area further into debt,” Washington said.
The Rev. Alvin Love remembers the day in the mid-1980s that a young community organizer named Barack Obama rang the doorbell at his Lilydale First Baptist Church Roseland. Unemployment was on the rise in the predominantly Black neighborhood in those days after local steel mills had closed and Obama, who worked with a church-based community group, was looking for allies to support job training programs.
In 1986, a year after Obama arrived in the community, the Woodstock Institute released a study of 500 Chicago-area financial institutions, showing “huge inequalities” in the distribution of housing credit, favoring suburbs over poor city neighborhoods like Roseland, which had become increasingly segregated.
The area’s history of mortgage discrimination mirrors that of urban enclaves from Boston to Los Angeles. The practice of “redlining” began eight decades ago when the Federal Housing Administration drew up maps using red ink to delineate inner-city neighborhoods considered too risky for lending.
Congress passed the Fair Housing Act in 1968 and the Equal Credit Opportunity Act in 1974, which banned discrimination in lending and home sales based on race and national origin. Lawmakers followed in 1977 with the Community Reinvestment Act, to ensure banks were actively lending to credit-worthy borrowers in low-income areas.
The housing boom of the last decade, spurred on by the successive Clinton and Bush administrations that unleashed ambitious programs to widen buying, also brought about a practice known as “reverse redlining” or steering residents of minority neighborhoods into high-cost mortgages, which led to a flood of foreclosures when the market crashed. Many of the minority borrowers who were given subprime loans would have qualified for prime loans with better terms, according to the U.S. Justice Department.
Borrowers like Washington Jr., who had nearly paid off their traditional mortgages, instead got caught up in the craze of easy lending, refinancing into loans that were twice the original balance to pay college tuition for a child, fix their home or catch up with bills, Love said.
“It’s going to take a generation to get back to the point where homeownership can build wealth in this community,” Love said.
The Obama administration’s first programs to help homeowners were geared toward keeping them in place through loan modifications, refinancing into lower-cost loans and $7 billion in neighborhood stabilization funding, 60 percent of which has been used in minority communities. The grants paid to rebuild once uninhabitable homes for first-time buyers on the south side of Chicago and Baltimore and demolish others in Detroit and Cleveland.