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Black families must focus on asset building

By Charlene Crowell/NNPA Columnist
On May 18, 2015

Blacks lag behind in earnings, home ownership and wealth in comparison to Whites. 

As the wealthy few continue to prosper, the rest of the nation is caught in a financial tug-of-war between stagnant wages and a rising cost of living. In communities of color, chronic unemployment and underemployment and a host of other social ills are added burdens to an already challenging economy.

These and other disturbing trends were the focus of the recent Color of Wealth Summit, conceived and convened by a national research organization, the Insight Center for Community Economic Development and a solution-oriented social change nonprofit, the Center for Global Policy Solutions. The two-day conference engaged prominent thought leaders to propose solutions to the growing racial income and wealth divide that has come to characterize America’s economy.

According to Maya Rockeymoore, its president and CEO, “Most organizations and policy makers focus on improving income and income supports such as safety net programs.

Recent research confirms how hard it is for families that lack adequate earnings, to make it from one payday to the next. While the idea of saving is valued, for too many consumers nothing is left once basic living expenses are met.

According to the most recent report of the Joint Economic Committee of Congress:

Median net worth in Black households fell by more than 40 percent from 2007 to 2013. White households during this same period saw median net worth drop 26 percent;

Median weekly earnings of Black college graduates working full-time and their White counterparts showed that the Black grads’ annual earnings were $12,000 less; and

Overall, the Black median earnings of $34,600, is nearly $24,000 less than the same measure for Whites.

“The same groups of people who have historically been left behind are growing in number and population,” observed Angela Glover Blackwell, a summit participant and founder and CEO of PolicyLink. “It is critical that we support asset-building programs and policies that create and protect opportunities for all families to save and invest in themselves, their futures, and their communities.”

Historically, homeownership has been the gateway to building wealth and assets. Unfortunately, the nation’s foreclosure crisis altered wealth-building for millions. According to the National Association of Real Estate Brokers, nearly 14.8 million foreclosure notices were filed from January 1, 2007 to May 31, 2013.

By late 2014, according to the Census Bureau, only 42 percent of Black families were homeowners – more than 22 percentage points lower than that of the nation (64 percent) and 30 percentage points lower than that of Whites (72 percent). The current homeownership level is the lowest since 1993.

While most Black and Latino homebuyers have had their mortgages underwritten by government-backed programs such as FHA, VA and USDA, the greater challenge has been access to private sector conventional mortgages that over the life of a loan are far cheaper than the government-backed offerings.

The annual Home Mortgage Disclosure Act report (HMDA), quantifies by race and ethnicity mortgage lending and denials for mortgage loans. For 2013, the most up-to-date report, the data clearly reveals that while conventional mortgage originations rose slightly from 2012 to 2013, nationwide Black consumers, who are more than 13 percent of the population, received only 2.3 percent or 36,903 loans. In 2012, the same data point was even smaller, with only 26,500 such loans.

Earlier research by the Center for Responsible Lending (CRL), a summit co-sponsor, revealed that many homebuyers of color were steered into higher-cost, subprime loans – even when they qualified for cheaper ones. After analyzing 50,000 subprime loans, CRL concluded that Blacks and Latinos were almost a third more likely to receive a high-priced loan than were Whites with the same credit scores.

“Proving that when families receive responsible mortgage loans, they are able to build a financial safety net that they can access during challenging times,” said Nikitra Bailey, a CRL executive vice-president.

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

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