The Role Of Race In The Mortgage Mess

(CBS)  Just six months after buying his home in New York City, CBS News correspondent Randall Pinkston reports, Michael Wiggins fell behind on his payments.

Pinkston asked Wiggins if he was afraid at that point that he would lose his home.

"Yes," Wiggins told him, adding, "I knew I was going to lose it."

Wiggins, a city bus driver, was one of millions of Americans caught in the subprime mortgage crisis.

His Mortgage Lenders Network loan gave him an 11 percent interest rate with a payment of $3,900 a month. But that jumped to $4,200 a month because of delinquency fees and penalties.

Knowing he was sinking fast, Wiggins looked for refinancing at commercial banks.

"I would say I went to eight banks," Wiggins said.

"And what did they tell you?" Pinkston asked.

"They were telling me no," he answered.

But one bank said yes - not a big institution with billions in assets - but a small one, Carver Federal Savings.

With Carver, Wiggins received a 7.5 percent fixed interest rate, a $2,600 a month mortgage and a $3,500 line of credit.

Carver president Deborah Wright says they get hundreds of applications from people like Wiggins, but not everyone qualifies.

Pinkston asked Wright how the bank decides on who they can help.

"There are some core principles around," Wright explained. "What's the real estate worth...do you trust the person to straighten up and fly right?"

Some community banks believe there's a racial component to the sub prime mortgage crisis, an idea supported by a Federal Reserve Study that found 55 percent of African Americans, compared to 17 percent of whites, were steered to subprime mortgages, even when they were qualified for lower interest rates.

"It's a surprise to some people," Wright said. "It's not a surprise to us."

One reason Carver and other community banks are in a position to help is because they stuck to conservative lending principles and avoided the subprime bandwagon, investing in people they know.

"They looked at me as a person," Wiggins told Pinkston, "Everybody else seemed to look at me as a score or something like that."

A small gesture - with big returns.

[jghutto]

You know, I would expect everyone that is giving a note and mortgage for a purchase - especially purchasing a house - to consult an attorney. An attorney would explain the terms of the note, and
ALL THAT FINE PRINT. The security deed which one signs contains things like "permanent fixtures becoming a part of the mortgage, that if you fail
to pay the ad valorem taxes and property insurance that they can pay it and add it to your note, and so on. They also would explain an "acceleration clause" that so many must be overlooking. Most security deeds say something about the fact that if one "accelerates in payment more than 30 days that the lender, at its option, has the right to demand the balance in full. Sometimes they might agree not to demand the balance in full but instead renegotiate the interest rate with you. If you had a low rate interest they might agree to extend your loan but raise the interest rate on you.

It just seems to me that people these days are not reading the fine print and are just signing anything put before them!!!!!!!!

[jghutto]

You know, I would expect everyone that is giving a note and mortgage for a purchase - especially purchasing a house - to consult an attorney. An attorney would explain the terms of the note, and
ALL THAT FINE PRINT. The security deed which one signs contains things like "permanent fixtures becoming a part of the mortgage, that if you fail
to pay the ad valorem taxes and property insurance that they can pay it and add it to your note, and so on. They also would explain an "acceleration clause" that so many must be overlooking. Most security deeds say something about the fact that if one "accelerates in payment more than 30 days that the lender, at its option, has the right to demand the balance in full. Sometimes they might agree not to demand the balance in full but instead renegotiate the interest rate with you. If you had a low rate interest they might agree to extend your loan but raise the interest rate on you.

It just seems to me that people these days are not reading the fine print and are just signing anything put before them!!!!!!!!

[strugglingin]

I know this is suppose to be about "race" but it''s not when my husband and I took a mortgage for our home we were doing fine. We didn''t plan for an economic downfall. My husband is in construction with a modest pay But we didn''t plan on a lay off, our mortgage was pilling up and an unemployment check of $191 a week dose not cover a payment of $1085 a month. I would call my mortgage company every day and be put on hold no one would even try to work with us to resolve the issue. We were told when we got our loan we had good credit and we were getting a good deal at 9.99% for a home for $135,000. We were not! We didn''t know. So we our mortgage company wouldn''t work with us We tried refinancing with major banks and local banks no one would give us a loan Because our credit took a hit for more than 200 points and we were only behind 2 payments. We don''t have CREDIT CARDS so we couldn''t use them! I finally got enough gathered up to get caught up and the bank refused payment and foreclosed on us. Our house will be sold at sheriff sale in April. We are a white family so I don''t think this is all about race! The Bus Driver should be happy and count his blessings a bank saved him. And the rest of you should step back for a minute And think before you blame it all on the borrowers! We didn''t ask for lay offs , downsizing and plants shutting down only to reopen in other companies. I was let go because the company I worked for chose to outsource to India.

[facts6]

This doesn''t make sense. If a family with good credit is told they are subprime why didn''t they question it?

If they are subprime because of the price of the house against income, then they deserve what happens.

The homeowners are not being candid because they know the government will bail them out.

[inner_g]

and i agree $3900 (if less than what he makes) would be unwise. but nowhere in the story does it say how much he makes as a city bus driver in NYC. but he should have been paying on time.

**I''ve always thought it was pretty stupid to raise rates/payments when a person is struggling to pay. It seems it would make better sense to not only raise interest rates, but lower the payments and extend the contract time. That way, the bank still makes a profit return on their investment, and the home buyer can actually MAKE the payments. There has to be a way to do this. It just takes some creativity of thought. Anything can be accomplished.

[inner_g]

and i agree $3900 (if less than what he makes) would be unwise. but nowhere in the story does it say how much he makes as a city bus driver in NYC. but he should have been paying on time.

**I''ve always thought it was pretty stupid to raise rates/payments when a person is struggling to pay. It seems it would make better sense to not only raise interest rates, but lower the payments and extend the contract time. That way, the bank still makes a profit return on their investment, and the home buyer can actually MAKE the payments. There has to be a way to do this. It just takes some creativity of thought. Anything can be accomplished.

[inner_g]

The ''race'' part of the story speaks for itself and is summed up in one paragraph. It is "an idea supported by a Federal Reserve Study that found 55 percent of African Americans, compared to 17 percent of whites, were steered to subprime mortgages, even when they were qualified for lower interest rates."

I can see that many people who''ve commented chose to overlook that, but that is a shame. It shouldn''t be overlooked just because its not something we want to admit. The opinions expressed about this guy underscore the effects of the negative imagery projected onto African Americans by media, academia, labor, legislature, etc.

We as a people have to do better to ensure that all of us are treated fairly. Stuff like this simply should be beneath us...should be beneath adults. Period.

Shame on you bank employees.

[inner_g]

The ''race'' part of the story speaks for itself and is summed up in one paragraph. It is "an idea supported by a Federal Reserve Study that found 55 percent of African Americans, compared to 17 percent of whites, were steered to subprime mortgages, even when they were qualified for lower interest rates."

I can see that many people who''ve commented chose to overlook that, but that is a shame. It shouldn''t be overlooked just because its not something we want to admit. The opinions expressed about this guy underscore the effects of the negative imagery projected onto African Americans by media, academia, labor, legislature, etc.

We as a people have to do better to ensure that all of us are treated fairly. Stuff like this simply should be beneath us...should be beneath adults. Period.

Shame on you bank employees.

[jghutto]

I remember when the limit people could borrow was just 2.5 times the household annual income and if a woman was under 40, only 40% of her income counted.
Of course, that has changed but I don''t think mortgage companies should keep going up to 3 and 4 times annual income in making loans. There also was once a down payment which would give people an incentive to try to keep their homes. Further, when the adjustable rate mortgages came along, I understood that was a cap on how high the rate could be adjusted. I feel the adjustable rate mortgage has been our downfall. If people want it, they should have to qualify based on the maximum they would have to pay at a future point, even though they might be getting a break right now.

Also, I believe most mortgages have a "deficiency judgment clause" but I don''t think mortgagors pay much attention to it as they feel the lenders will not go after them for any deficient they wind up with in reselling the property.

[katiekam]

It all comes down to good old common horse sense ... Mr. Wiggins simply didn''t make enough money to make these payments. Either he should have bought a less expensive home or not bought at all. Many people can''t afford to buy a home ... and they don''t. This has absolutely nothing whatsoever to do with race and everything to do with common sense. It''s well past time that people accept responsibility for their own actions instead of trying to blame it on the next guy for crying out loud.