The Role Of Race In The Mortgage Mess

Small Banks Are Coming To The Aid Of Minority Mortgage Holders In Crisis

(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.

[dowjones20k]

Anyone can get up and walk away if they dont feel the opportunity to secure financing is in their best interest ... most of these folks were probably thinking the housing boom was going to continue ... and they could sell if they needed to ...

Again, where in the world has PERSONAL RESPONSIBILITY in all of this?

Odd that no one is asking that question .. the reporter siad the guy was late and delinquent which caused his payment to increase ..

GET OFF THOSE CREDIT CARDS PEOPLE !!!

They will make you beleive you have more money than you really do ... and once you charge it .. at some point your gonna have to pay it back ..

Now I see Lasic surgery & plastic surgery commericials offering financing !!!

What ever happened to saving a little?

You will get what you deserve if you live beyond your means ....

When will it end?

WE AMERICANS ARE SO WASTEFUL, GULLIBLE and DUMB ...

[cbs_oliver]

The headline is off.

Better might be "Minorities suffer from exploitive lending practices."

[searcher911]

Oh come on! Anyone making Less than $3000 per month who takes out a mortgage costing $3900 a month has to take a bit of responsibility for his own the debacle. Even a grade schooler should be able to figure out it won''t work, starting with the $900 per month shortfall. Even with a payment of $2600 per month where is the money for food, clothes, gas, insurance, etc. etc., (aka living) going to come from? Old school rules say a house shouldn''t cost more than 3 times your annual income (in this case $108,000). If you stretch it to 4 times your the annual income you are up to $144,000. (Of course this is with a 20% down payment.)
The financial irresponsibility has to be shared with both the mortgage company AND the borrower...Kind of like credit card, but don''t get me started on that subject!

[forthepeopl1]

Carlyle Capital had leveraged $670 million in equity 32 times to finance a $21.7 billion portfolio of highly rated mortgage-backed securities issued by U.S. housing agencies Freddie Mac and Fannie Mae.

The company, to establish financing for the deals, entered into repurchase agreements with banks in which it would post the mortgage securities as collateral in exchange for cash.

If the value of the security held as collateral falls, the lender has the right to ask for more collateral -- a "margin call" -- to secure the loan.

If the borrower does not meet the margin call by putting up more collateral, the lender may sell the security.

so all the banks used the inflated houseing prices to get large sums of cash, our mortages that they lied in the first place saying a home is valued at 400000 or 500000 and it was really worth 200000, then go to investers and say look we have so much equity that if they go bad we still make billions..OOPS THE VALUES HAVE COME DOWN TO WHAT THE HOMES ARE REALLY WORTH, OOPS, WHAT DO WE DO?????? LETS JUST RIGHT IT OFF...NO MATTER THE GOVERNEMNT WONT LET US GO DOWN..

GREAT JOB..CONGRESS HOW ABOUT SAVEING US AMERICANS INSTEAD OF THE ONES THAT LIED AND CHEATED US...

[cusefanjapan]

Jowand, he just got a loan at a lower rate. My point was proved.

[confused101a]

Posted by joyous88 at 09:07 PM : Mar 09, 2008

What is the Role of Republican Greed in the mortgage mess?
and lets not forget to thank GW Bush and R Reagan for
the idiotic theory of trickle down economics put into action
criminal republicans

Ok, What is the role of our Democrats Greed in this mess?

Oh that%u2019s right only Republicans can be greedy.

Trickle down economics, as apposed to what ?
The redistribution of wealth via taxation for social programs.

Common people let%u2019s get real the people that really need help will not get it.

[jowand]

How do you know that''''s his only job? What if he lives with a relative who also works? Or if he was renting out a room in the house to help pay for it? There are possibly many other avenues of income. Maybe he lost one of his sources of income and that caused him to default when the payments were raised.
Posted by cusefanjapan at 11:59 AM : Mar 10, 2008

He would have to drive 4 buses to make this kind of money. Relatives living with you don''t count on mortgage applications, unless it is a spouse with a full time job.

[jowand]

I am not saying the default wasn''''t his fault. I am saying him and a lot of other minorities not being able to get a loan at a decent rate was the article''''s main point. I was rebutting the arguments of others who wrote in to say there was no racial component involved with him being given a loan at a higher rate. I still say there was.
Posted by cusefanjapan at 12:12 PM : Mar 10, 2008

The guy couldn''t qualify for a regular FHA loan of that size because he didn''t make enough. CBS is trying turn this into a racial issue when it isn''t one.
If you want to assign blame it should be on the people who write the laws that allow this type of predatory lending to take place.

[cusefanjapan]

ll I can go by is the facts reported by CBS. Anything added or left out cannot be assumed by the reader. Even if he could have afforded it, his payment jumped because of "delinquency fees and penalties" making it his own fault.

Posted by my2cents
I am not saying the default wasn''t his fault. I am saying him and a lot of other minorities not being able to get a loan at a decent rate was the article''s main point. I was rebutting the arguments of others who wrote in to say there was no racial component involved with him being given a loan at a higher rate. I still say there was.

[jowand]

Under the old mortagage rules he would have had to make $16000 a month to qualify for a monthly mortgage of $3999; driving two buses and renting half your house out wouldn''t get this much.
Crooked lenders and a sucker adds up to this mess; problem is no one goes to jail they just get fined.