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Housing Crisis Erases Wealth of Blacks, Latinos

New America Media, News Report, Elena Shore Posted: Jun 19, 2009

After the largest growth in homeownership in history during the last 15 years, blacks and Latinos are now suffering their largest loss in wealth in modern history. And that erosion of wealth could lead to a second collapse in the national economy within a year.

This was the core message of a white paper released yesterday by the William C. Velasquez Institute. The report describes how this lost wealth-- more than $200 billion during the last three years -- could impede the economic recovery of the entire country if it is not addressed.

What we found was, quite frankly,much more dramatic than any of us thought it would be, said Albert Jacquez, a principal with Strategic Solutions Washington, who co-authored the study, most importantly for the future --in the next year, 10 years, even 15 years as it relates to the emerging new class of potential homebuyers.

Latinos and African Americans were 230 percent and 270 percent respectively more likely to get subprime loans. Nine million home foreclosures are predicted in the next two years and are expected to fall disproportionately on new black and Latino homebuyers, particularly in states like California, Texas, Florida and Arizona.

Baby boomers will soon be net home sellers, not homebuyers, said Jacquez. The demographics show the new homeowners will be Latinos, blacks and Asians. But without reforms, Jacquez said, they may not be in a financial position to take advantage of this opportunity.

The secret is that we are by no means out of the foreclosure crisis, said Dr. Raul Hinojosa, an instructor at UCLA and co-author of the paper. All of the policies at the state and federal level are a fraction of whats needed.

The Obama administration has not done enough to address this crisis, Hinojosa said. The administrations relief only affects 100,000 families, which he called a drop in the bucket. The problem is that if you have a regulatory reform when your foundation is still crumbling, he said, it is really not going to make a difference.

The report, The End of the American Dream for Blacks and Latinos: How the Home Mortgage Crisis is Destroying Black and Latino Wealth, Jeopardizing Americas Future Prosperity and How to Fix It, proposes policies to modify mortgage terms to help homeowners avoid foreclosures, provide a homebuyers tax credit that can be applied to down payments on new homes, and make available sustainable mortgages and refinancing for a new generation of homebuyers.

During the Great Depression, Hinojosa noted, homeownership was very low. Through programs created by the government in the 1930s, an entire generation of working-class people were able to buy homes. The problem is 98 percent of those products went to white families, Hinojosa said. Blacks and Latinos were kept out. What has to happen now, he said, is to create a new pathway for working-class and emerging middle-class families.

Researchers say the cost of doing nothing could be profound. If we do not stop the impending mountain of foreclosures which are coming down the pike, said Hinojosa, we could really arrest the progress that the United States has had over the last 50 years in maintaining itself as a middle-class country.

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