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October 29, 2014 ®l’e Fortiani» (©banner Page 7 Opinion articles do not necessarily represent the views o f the Portland Observer. We welcome reader essays, photos and story ideas. Submit to news@portlandobserver.com. Unequal Mortgage Market No Coincidence Losing ground on home ownership by M ichela Z onta Persistent racial and ethnic inequality in the mortgage market is not a coinci dence. Nearly 50 years after the adoption of the Fair Housing Act, newly released federal data indicate that people of color continued to lose ground in the homeownership market in 2013. In particular, black and Hispanic households continued to represent a shrinking fraction of the mortgage market and received higher-cost loans compared with white borrow ers. Tragically, many prospective black and Hispanic homeowners never reach the loan-decision stage of the home buying process. People o f color are still being treated un equally in the home mortgage mar ket, even when they demonstrate an ability to repay their loans. Blacks and Hispanics are more than twice as likely to be denied a mortgage as non-Hispanic whites with comparable incomes and risk profiles. However, the disparate treatment received by people of color is not confined solely to the loan approval stage of the mortgage lending process and does not necessarily take the form of a loan denial. Discrimi n a tio n b ased on race or ethnicity can take several forms during any stage of the process. D u rin g the p re -a p p lic a tio n stage, for exam ple, lenders may discourage borrow ers o f color from continuing with the loan application process even though they may qualify for a loan. Lend ers also may not provide the same inform ation to applicants of color that they provide to white appli cants. Further, pair testing stud ies— in which tw o individuals pose as equally qualified borrow ers in every respect except their race or ethnicity and inquire about the availability and terms of home m o rtg ag e lo a n s— d e m o n stra te that people of color are consis tently treated differen tly than equally qualified whites. W hen people of color do end up at the lending table, they are much more likely to receive costly subprim e loans and loans with features that are associated with high er fo reclo su res than their white counterparts. A Wall Street Journal study found that most borrowers who received preda tory loans in 2006 would have qualified for better, more sustain able loans. M ore recently, the Center for Responsible Lending dem onstrated that racial dispari ties are evident even when com paring borrowers within the same credit score ranges, and especially for borrowers with higher credit scores. For exam ple, among borrowers with good credit— a FICO score o f more than 660— African Ameri cans and Latinos received a high interest rate loan more than three tim es as often as white borrowers. Blaming people of color for low FICO scores and insufficient fund ing for a down paym ent repre sents a m yopic perspective of unequal access to hom eownership in the United States. Instead, a num ber o f other factors contrib ute to inequality in the m ortgage market. First, people o f color’s inabil ity to pay higher down paym ents is due in large part to decades, if not centuries, o f discrim ination that have created ex cep tio n al wealth gaps between com m uni ties o f color and white popula tions. Second, credit scoring is not the best m easure o f risk and often has a discrim inatory effect on com m unities of color, as a National Fair Housing Alliance study shows. Third, racial segregation— cre ated and perpetuated by both in stitutionalized public and private d isc rim in ato ry p ra c tic e s— has historically precluded com m uni ties o f color from accessing safe and affordable home purchase fi nancing. It has also lim ited their opportunities and conditions for wealth accum ulation. As Jacob Rugh and Douglas M assey ex plain, residential segregation and the ongoing lack of access to m ort gage credit in black and Hispanic neighborhoods have com bined to create the ideal conditions for predatory lending in those com m unities. People o f color— who will ac count for three-quarters o f h o u se hold grow th over the com ing de cade— represent the future o f the housing m arket and the econom y as a whole. Housing represents the foundation o f the n atio n ’s o p portunity structure since it d eter m ines o n e’s access to education and jo b opportunities, as well as the related ability to accum ulate wealth. Yet, people o f color still lag behind whites in the housing market. Contrary to what some argue, the housing industry and C on gress should indeed pay m ore attention to the m assive dispari ties that persist in the housing m arket and the econom y based on th e c o lo r o f o n e ’s sk in . If policym akers do not recognize and address racial and ethnic dis parities in access to housing and the opportunities attached to it, the nation will not be able to re duce in e q u a lity , im p ro ve the e c o n o m y , o r s tre n g th e n th e middle class. Michela Zonta is a Senior Policy Analyst fo r the Housing Finance and Policy team at the Center fo r American Progress. Reserve Chair Talks about Income Inequality Speaking honestly and openly by M arc H. M orial With all the politi cal, national security and disease news re cently flooding the airw ay s, you m ay have missed one of the most impor tant American speeches from one of the world’s most powerful economic leaders. In a speech at the Federal Re serve Bank of Boston earlier this month, Janet Yellen, who in Febru ary became the first woman Federal Reserve Chair, bravely waded into the national debate on income in equality. Her remarks echoed many of the opportunity themes that have been championed by the National Urban League throughout our 104- year history. D raw in g from the F ed eral Reserve’s triennial Survey of Con sumer Finances, Yellen documents that “The past several decades have seen the most sustained rise in in equality since the 19th century...” She also outlines what she calls four “building blocks” of opportu nity to help improve the economic circumstances of individuals and families. These building blocks closely align with the National Urban League’s long-stand ing economic empowerment agenda: Resources available to children; higher education that families can afford; busi ness ownership; and inherited wealth. The average income of the top 5 percent of households grew by 38 percent from 1989 to 2013, while the average real income of the other 95 percent of households grew less than 10 percent. The average real worth of fam i lies in the top 5 percent has nearly doubled, on net- from $3.6 million in 1989 to $6.8 m illion in 2013, while the average net worth of the lower half of distribution, repre senting 62 million households, was $11,000 in 2013. W hile A m ericans in all eco nomic groups were adversely af fected by the h o u sin g c risis, hom eow ners in the bottom half of households by wealth reported 61 percent less home equity in 2013 than in 2007. The next 45 percent reported a 29 percent loss o f housing wealth, and the top 5 lost 20 percent. Research tells us that inequal ity tends to persist from one gen eration to the next. One study found that 4 in 10 children raised in fam ilies in the lowest-incom e fifth o f households remain in that quintile as adults. Again, while Yellen points out that “to the extent that opportu nity itself is enhanced by access to econom ic resources, inequal ity of outcom es can exacerbate inequality o f opportunity, thereby perpetuating a trend of increas ing inequality,” she does not at tem pt to directly link how much the opportunity factors influence income and wealth inequality. But we do. We know that opportunity is not equal when affluent fam ilies have sig n ifican t resources for things like better nutrition, health care and early childhood educa tion, while many other households have very little, if any resources, to spare for these purposes. We know that low-income fami lies face an unfair disadvantage when public funding for safety net program s and public educa tion is cut. We also know that the rising cost o f college, the slow down in business form ation for low-incom e Am ericans, and the huge gap in inheritances between the top and bottom rungs o f the econom ic ladder directly impact econom ic prosperity and m obil ity. W hat m akes Janet Y ellen ’s com m ents about incom e inequal ity so rem arkable is the fact that rarely, if ever, has a Fed C hair spoken so honestly and openly about such a hot-button issue. We applaud her for speaking out, and this is an issue that should “greatly concern” us all. Marc H. Morial is president and chief executive officer o f the Na tional Urban League. "Your Budget is our mission" BUDGET INSURANCE E N T E R P R IS E S . L L C AUTO t DANNY CHAN DURAN BEASLEY At Budget we work with many insurance companies to find the best fit for your needs and to fit your Budget. Call today for a free quote! 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