Last week the NAACP took on Wells Fargo and HSBC in two class-action lawsuits, accusing the mortgage lenders of targeting African-Americans with subprime loans. While the records of Wells Fargo and HSBC, in particular, are private, various empirical studies have shown that mortgage lenders in general have steered African-Americans toward loans with higher interest rates. According to the National Commission on Fair Housing and Equal Opportunity, in 2007, roughly 54 percent of African-Americans received subprime loans compared to approximately 17 percent of Whites. Consequently, our community has also been hit harder by the foreclosure crisis.
The President’s Plan
This pattern has not been lost on the Obama administration, says Housing and Urban Development Secretary Shaun Donovan. “While this is a problem facing the entire nation, in nearly every neighborhood across the country, the economic crisis and particularly the foreclosure crisis has affected African-Americans in a fundamentally disproportionate way,” Donovan told reporters during a conference call on Monday. According to Donovan, the housing plan that the President introduced last month will help victims of subprime loans who are now on the brink of losing their homes.
The program involves spending $75 billion to help distressed families—who owe more than their homes are worth—keep their houses. Under the plan, four to five million homeowners with current loans under Fannie Mae and Freddie Mac will get to refinance their homes to lower rates, and three to four million families will be allowed to modify their loans.
When President Obama first unveiled the plan, he emphasized that it would only help homeowners who had acted responsibly, and that it was not designed to help people who brought homes they couldn’t afford. The exact line on who is considered responsible enough to benefit from the plan, however, has not always been clear. Secretary Donovan confirmed that the recipients of subprime mortgages, who were put in homes they couldn’t afford due to predatory lenders hiking up their interest rates, are in fact eligible.
“In situations where borrowers got subprime loans that have adjusted up to very high interest rates—8, 10, 12 percent interest rates—those are some of the families that are going to benefit most from the President’s plan,” he said. Donovan further explained that, in terms of people who the program will not help, the President was referring to those who lied about their income or engaged in any other kind of fraud.
Penalizing Predatory Lenders
Looking forward, Donovan said the administration will also take new measures to prevent future lending violations. Describing fair housing enforcement as a high priority, he said that HUD has begun working with Attorney General Eric Holder and other administration officials to identify how to strengthen enforcement against financial institutions that targeted minority communities. “You will see that President Obama is very focused to make sure that our regulation of financial institutions never lets this happen again,” he said.
How to Participate
To assist homeowners on taking advantage of the President’s housing plan, Donovan says that HUD has 81 regional offices, a toll-free number (888-999-HOPE), and information on its Web site, www.hud.gov. He also warned against scams. “If you’re a homeowner, you never have to pay for access to the President’s plan,” he said. “There is no fee to talk to your servicer. If someone is trying to charge you to participate in the President’s plan, you should look elsewhere.”