WASHINGTON, DC – April 4, 2007 – National civil rights groups, including the Leadership Conference on Civil Rights, the NAACP, the National Fair Housing Alliance, the National Council of La Raza, and the Center for Responsible Lending called today for mortgage lenders, loan servicers and loan investors to institute an immediate six-month moratorium on subprime home foreclosures resulting from reckless and unaffordable loans in the subprime market.
The groups want to stop home losses for families that received unaffordable subprime mortgages with "payment shock." The predominant loan type marketed by subprime lenders in recent years are hybrid subprime mortgages, which begin with a temporary fixed interest rate that changes to a much more costly adjustable-rate mortgage (ARM). These "exploding" ARMs, as well as other types of non-traditional mortgages, have been a driving force in massive foreclosures occurring today.
As foreclosures continue to rise on subprime mortgages, a disproportionate share of the harm falls on African-American and Latino homeowners and the neighborhoods where they live. Forty percent of Latino families and over half of African Americans who receive home loans get higher-cost mortgages, predominately subprime loans. To prevent further home losses in vulnerable communities, industry must work actively with homeowners to help them keep their homes by transitioning these borrowers into affordable loan products.
The groups said that the need for a moratorium on foreclosures is urgent. The six months will be time for the industry to work with the groups to establish benchmarks and set long-term goals for easing the foreclosure crisis and to assist borrowers. "As the nation seeks to recover from the devastation caused by reckless subprime lending, we must squarely address the disproportionate impact on African-American and Latino communities," said Wade Henderson, president and CEO of the Leadership Conference on Civil Rights. "For years, subprime lenders have targeted communities of color and aggressively marketed dangerous and abusive loans. As a result, people in communities of color have lost billions of dollars in home equity, and today they are losing their homes on a massive scale."
"If lenders, servicers, Wall Street and policymakers allow the flood of subprime foreclosures to continue rising unchecked, years of economic progress in communities of color will be wiped out, and the racial wealth and equity gap will widen even further," said Hilary O. Shelton, director of the NAACP Washington Bureau. "Without intervention, subprime foreclosures will impose the greatest drain on African-American and Latino wealth ever experienced in this country."
"Since this country was founded, property ownership has been systematically denied to African Americans and other minority communities through discriminatory laws, abuses of good laws and even government policy," said Shanna L. Smith, president and CEO of the National Fair Housing Alliance. "Now the subprime market has invented a new barrier: dangerous loans disguised as opportunities. Wall Street must also take responsibility for securitizing these dangerous loans especially after scholarly reports, consumer advocates and civil rights groups warned about the lack of suitability and the harm of these exotic loans."
"Homeowners saddled with defective loans need relief," said Mike Calhoun, president of the Center for Responsible Lending. "Those responsible for these mortgages have a duty to fix the broken product they sold just like anyone else. The industry must work quickly."
Recent lending data show that subprime mortgages—which make up only 13 percent of the overall mortgage market—account for over 60 percent of new foreclosure filings. "Latino and African-American families are being pushed into high-cost and risky home loans. The result," said Janet Murguia, president of the National Council of La Raza, "is that more of our families are falling victim to loans that were not a good fit in the first place. This is eroding the hard-earned wealth our communities spent decades fighting for."
The groups also called on Congress to pass anti-predatory legislation, including a private right of action, to assure protection for minority and other communities and to see that this situation does not happen again.
Leadership Conference on Civil Rights www.civilrights.org Center for Responsible Lending www.responsiblelending.org National Association for the Advancement of Colored People (NAACP) www.naacp.org National Council of La Raza www.nclr.org National Fair Housing Alliance www.nationalfairhousing.org