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Threat to American Dream of Home Ownership Especially Devastating for Seniors, Minority Communities

July 21, 2011

 

As the economic downturn continues to plague employment, education and every other aspect of American living, including housing, it is imperative to note the ongoing loss of wealth in communities of color wrought by the loss of homeownership through foreclosures and loan modification scams. With today’s launch of the much-anticipated Consumer Financial Protection Bureau (CFPB), I am particularly reminded of how the attainment of the “American Dream” for African-Americans and Latinos continues to be threatened at the hands of not only discriminatory and disparate lending practices, but also loan modification scams and foreclosures.

As far too many Americans continue to lose their homes to foreclosure, our seniors and minority communities continue to be prime targets for predatory promises of foreclosure relief. Today the Lawyers’ Committee for Civil Rights Under Law released its first report on the loan modification scam issue, highlighting the severity of the impact these scams are having on the senior population.  Lawyers’ Committee’s staff attorneys analyzed information submitted by distressed homeowners to our national Loan Modification Scam Database and found, for example, that the proportion of scam victims who are seniors has steadily increased over the last 20 months. Moreover, of the seniors who reported their race, over 42 percent identified as African-American or Latino.

Since the launch of the Lawyers’ Committee’s Database, more than 16,000 homeowners have reported scams or potential scams totaling over $40 million in lost money. These scammers claim phantom foreclosure counseling, lease-back or repurchase scams, and more.

Loan modification scams and other foreclosure rescue frauds continue to affect thousands of distressed homeowners. Many of these homeowners were minorities steered toward subprime loans, despite qualifying for prime loans. Scammers literally steal funds from desperate homeowners who are behind in their payments by promising to obtain favorable loan modifications for a fee but who in reality do nothing to assist these homeowners after taking their money.

Some scammers entrap homeowners by promising to refund all monies paid if they are unsuccessful in obtaining a loan modification but never do so. The worst scammers use purposefully misleading names to trick homeowners into thinking that they are their lending institution or even governmental entities trying to help.

The Lawyers’ Committee is heavily involved in litigation to shut down scams that are displacing people from their homes. We have successfully shut down loan modification scam networks in New York and have filed suit in California. The Lawyers’ Committee is proud of our successes in advocating for consumers’ rights. In addition, the Lawyers’ Committee’s Fair Housing and Fair Lending Project has done substantial work in amending the Fair Housing Act, advocating for the Disparate Impact Standard of Proof for Violations of the Fair Housing Act, supporting the Dodd-Frank Wall Street Reform and Consumer Protection Act and continuously litigating discriminatory lending for minorities’ rights.

We also continue to advocate for legislation to give bankruptcy judges the authority to resolve mortgage debts on owner occupied homes which would be the most important tool for families of all races. With less than 50 percent of African-Americans owning homes, compared to over 70 percent of non-Hispanic Whites (U.S. Census Bureau), African-Americans and other minorities are heavily affected by litigation, legislation and practices surrounding fair lending and fair housing. Too often, substandard housing, segregation and the lack of affordable housing in minority communities continuously worsens economic, political and educational disparities. Much legislation has been amended and introduced in order to prevent discriminatory practices in the housing market, however, advocacy for improved enforcement of the Fair Housing Act and other legislation must continue.

Even though America continues to struggle through an economic downturn and the housing market is seemingly unsecure, owning a home is still important and possible in today’s society. Buying and owning a home is a vital part of the American dream; unfortunately, loan modification scams, discriminatory lending and foreclosure all undermine this aspiration, turning it into a nightmare. For this reason, we urge the Obama Administration and Congress to resist budget cuts which would eliminate or decimate vital home counseling programs.

To preserve the American Dream, homeowners must stay informed, utilizing resources available through national and local organizations and government agencies, and demand justice and equality. Only then will buying and maintaining a home not be a dream deferred.

I, along with the dedicated staff of the Lawyers’ Committee and other allies, will continue to combat barriers to fair housing and lending, especially in communities of color. It is incumbent upon Congress, now more than ever, to move on establishing an independent Consumer Financial Protection Bureau and strengthen home lending rules and other financial reform legislative matters. Furthermore, Congress and the Administration must work aggressively to address systemic economic inequalities and barriers to a level playing field for all Americans, including homeownership, a key contributor to wealth accumulation.

Barbara Arnwine is Executive Director of the Lawyers’ Committee for Civil Rights Under Law.

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