A housing rescue nears – but for whom?
Minority neighborhoods would especially benefit from a $3.9 billion aid package.
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It is cities such as these – along with Cleveland, which felt the brunt of the housing crisis early – where the pressure is building for local politicians to come up with a solution.Skip to next paragraph
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Activist groups say this racial dimension to the problem puts a special responsibility on the federal government to relieve distress in these neighborhoods.
"The subprime lending debacle has caused the greatest loss of wealth to people of color in modern US history," says Amaad Rivera, lead author of a 2008 report by United for a Fair Economy. The Boston-based research group estimates that black/African-American borrowers will lose between $71 billion and $92 billion in the current foreclosure crisis, while Latino borrowers will lose between $75 billion and $98 billion.
"The difficulties have been concentrated in 'subprime' loans, which generally go to borrowers with limited or damaged credit, although there is evidence that some borrowers are shifted into the subprime category because they are African-American or Hispanic," said Rep. Barney Frank (D) of Massachusetts, who chairs the House Financial Services Committee, in a statement last week.
House Democrats say a new $3.9 billion federal program to help state and local governments buy up foreclosed properties would be part of the solution. The Bush administration has opposed such block grants on the grounds that "the principal beneficiaries of this type of plan would be private lenders – who are now the owners of the vacant or foreclosed properties – instead of struggling homeowners who are working hard to stay in their homes."
Still, House Speaker Nancy Pelosi said last week she doubts Mr. Bush will veto the housing-rescue package, which contains a separate provision he wants to strengthen the financial positions of faltering mortgage companies Fannie Mae and Freddie Mac. The disputed funds enable communities to buy up properties once on the revenue rolls that are now "taking the value of their neighbors' homes," she said.
Conservative Republicans worry that Democrats and the Bush administration are trying to resolve today's foreclosure crisis at too high a cost – now and in the future.
"Everyone realizes that it would be calamitous for Fannie and Freddie to fail, but give me a legislative package to ensure we're not here with a bigger bailout five years later, and I haven't seen that," says Rep. Jeb Hensarling (R) of Texas, who chairs the Republican Study Committee, the conservative wing of the Republican caucus.
In a bid to address the race-based fallout of the subprime mortgage crisis, the Federal Reserve Board is working with community groups to help stabilize neighborhoods where foreclosure rates are high. Home-vacancy rates increased sharply in 2006 and hit 2.9 percent in the first quarter of 2008, according to the US Census Bureau, diminishing the value of nearby homes and adding to the burden of local governments dealing with the fallout.