- Racial Equity
- Talk About Race
By Kevin Stein & Kristina Bedrossian, California Reinvestment Coalition
Neighborhoods of color are still reeling from the havoc wrought by the foreclosure crisis. The disproportionate number of high-cost subprime and option ARM loans in communities of color led to concentrated foreclosures and destabilization that have effectively re-redlined these communities.
Now, with limited relief available for some borrowers through federal programs and legal settlements, there is serious concern that this cycle of harm has taken a new turn. Last year’s $26 billion National Mortgage Settlement (NMS) was hailed as a significant step towards holding the largest banks accountable for the abusive servicing behavior that led to unnecessary foreclosures for countless homeowners. It has now been a year since the settlement was finalized, and the latest report released by its National Monitor Joe Smith shows that banks claim to have distributed $16.9 billion worth of consumer assistance in the state of California.
However, an important question plagues this initiative and others like it– who are the customers who were lucky enough to access this relief?
The settlement did not require banks to disclose demographic information about the borrowers or neighborhoods receiving assistance. The banks have refused to release this data, and Mr. Smith has so far declined to collect it. If the banks are truly serving all communities equally and they have nothing to hide, then why do they refuse to release this information?
Since the early days of the settlement negotiations, creating transparency and ensuring that the hardest hit communities were prioritized in the distribution of relief have been the rallying cries of advocates, civil rights groups, housing counselors, and community organizers. These groups know all too well how borrowers of color are unfairly treated and how difficult it has been for borrowers of color to access principal reduction loan modifications.
The failure of banks to translate key foreclosure relief documents has resulted in qualified borrowers unknowingly throwing away a chance to keep their homes, and making them vulnerable to loan modification scammers who will speak their native tongue. Last year’s legal settlements between the Department of Justice and Bank of America and Wells Fargo remind us that discriminatory lending practices are still alive and well. The DOJ alleged that Countrywide (purchased by Bank of America) and Wells Fargo both charged African American and Latino borrowers more when making home loans, and steered them into home loans that were more expensive than loans they offered to similarly situated white borrowers. Further, a recent General Accountability Office report looking at a similar relief program identified banks’ failure to conduct sufficient outreach to underserved communities as a major barrier to relief reaching all communities.
Preliminary findings from the California Reinvestment Coalition’s 2013 survey of 84 housing counselors suggest that certain borrowers and neighborhoods have disproportionately higher rates of foreclosure and less access to loan modifications. A majority of the counselors reported:
To ensure that the NMS’s anti-discrimination provisions and fair lending laws are honored, Mr. Smith should require the collection, analysis, and public reporting of data that show the race, ethnicity, gender and census tract of borrowers who are (and are not) getting assistance . He must aggressively police the agreement’s existing metrics – and impose new metrics and requirements as needed – to ensure that all consumers have equal access to loan modification relief and protection from the abusive servicing practices that are outlawed in the agreement.
These metrics and principles should go beyond this one settlement. Enforcement agencies and policymakers should make this standard for all future settlement agreements and programs that are distributing relief to consumers, ensuring that this relief is targeted to communities of color who were targeted for predatory lending and are now suffering from the highest rates of foreclosure. Barring access to this information leaves many questions unanswered and perpetuates the distrust of banks and the federal government that has spread through these communities.
If nothing is done to address these issues, it may be too late to stabilize and preserve the families and neighborhoods most impacted by predatory lending and the foreclosure crisis. Once the relief under the various settlements and programs has dried up, we may wake up to find that the intended beneficiaries have long since been displaced.
Kevin Stein and Kristina Bedrossian work for the California Reinvestment Coalition, an advocacy group that fights for fair and equal access to low income communities and communities of color in California.