photo credit: joelogon

If you ever wanted to understand how the recent sub-prime mortgage crisis has affected African-American women, then this post is for you. Chances are you’ve heard about the mass foreclosures across the nation and even the phenomenon known as Jingle Mail. We’ve read scores of articles about families foreclosing and losing it all due to bankruptcies and foreclosures, but what about African-American women? Did you know that AA women are disproportionately affected by the sub-prime meltdown? How did we get here? Where are we now? And, more importantly, how can we start over? I’ll show you how.

How Did We Get Here?

I’m not here to blame any one party for their actions as all involved are responsible for the situation we have today. Banks were greedy and turned a blind eye to shady loans being offered to unworthy NINJA candidates, i.e., No Income, No Job and No Assets which caused the mortgage industry to fall flat on its face. Then there’s the uneducated borrower who trusted the word of their real estate agent an mortgage broker without doing their due diligence with regards to the numbers involved. And, there are some who thought they could just beat the system. All involved should have thought about the fact that the banks had no incentive to refinance any loans because once you signed the paperwork, its yours. But, too many fell for it.

However, when the borrower can’t pay the note this leads to foreclosures and short sales which then reduce the value of the homes in that neighborhood, and its like a virus turning into the crisis we have today. No one even if they qualify able to refu because they don’t have enough equity for the refinance.

The Current Situation among African-American Women

Taking a closer look, according to Foreclosure Data Online:

A community of brick row houses, the Belair-Edison neighborhood, has recently been bought, for the most part, by single black women with children. According to an analysis of public records by a nonprofit community development organization called Reinvestment Fund, in the past four years more than half of the houses that have been foreclosed in the neighborhood were owned primarily by women.

Why is that? These are questions we need to ask ourselves because wolves will always be out there in sheep’s clothing pretending to help us get to the American Dream. Consumer Federation of America reports there was a 32 percent more chance of women receiving a subprime loan even though men and women have roughly the same credit scores. We clearly need to be more prepared in this area if we are to pursue that which we know as the American Dream which for others has become the consummate nightmare, losing hard earned life savings in a foreclosure and/or bankruptcy.

As a result many women, especially black women are faced with starting over due to ruined credit ratings, bankruptcy, walking away from a home because of frustrations in dealing with a bank that will not refinance after being promised a refi at the closing table. This continues to happen all throughout the nation today and it will be a while before the market settles down and corrects itself with regards to pricing and the mortgage crisis.

But what can those of you who are already there or thinking about jumping into the frying pan do? Well, you both have something in common, you have a chance to play the real estate game and get out unscathed by doing 2 things. Educating yourselves on the process and insuring that you will weather a financial crisis by being adequately prepared.

5 Tips on Getting Prepared

1. Pay Down Debt
   • Debt is Slavery. Consider that if you pay the minimum on your credit card bill it will take you years to pay off that balance. A good rule of thumb is if you can’t pay off the balance every month then don’t make the purchase.
2. Dispute/Repair all negatives on your credit report
   • Sign up for Suze Orman’s FICO® Kit Platinum and dispute the negative items on your credit report. They have built in form letters which allow you to dispute your accounts from their system. No snail mail necessary.
   • Creditreport.com says that a high percentage of consumer credit reports - up to 70 percent - contain errors. Is that collections account within your state’s statute of limitations? Does that refinance belong to you? Furthermore, can you call up your credit card company to arrange a payment plan so that they will report you as paying on time?
3. Save at least 3 months of expected housing expenses separate from anticipated closing costs
   • This is pretty self explanatory and if you can afford to save more then by all means do it. Looking at the current situation I would expand that target goal to at least 6 months. To many of us this may be daunting but take a look at CNN’s personal finance section and you’ll know why. It’s best to be safe than sorry.
4. Secure a trustworthy, smart and ethical Realtor and Mortgage lender/broker
   • I can’t stress this enough! You need a team to work on your behalf behind the scenes that isn’t only concerned about their bottom line, but about yours as well. Our realtor was sharp as a tact and went to battle for us each and every time. As well, our mortgage broker made sure that we understood the terms of our mortgage and was responsive and honest in answering our questions. Keep in mind, we did a fair amount of due diligence so in answering our questions, he confirmed what we already knew.
5. Buy a home below the cost of what the bank says you can afford.
   • Just because the bank says they will approve you, doesn’t mean you can actually afford it. Many factors play into taking your budget over the top such as increasing gas and oil prices, increase in grocery prices and factors surrounding the impending recession.

Are You Near Foreclosure? Help is on the way:

–Housing rescue: Allow more subprime mortgage holders to refinance into federally insured loans by raising the limit on Federal Housing Administration loans from $362,790 to as high as $729,750 in expensive areas. Increase the availability of mortgages by providing a one-year boost to the cap on loans Fannie Mae and Freddie Mac can buy, from $417,000 up to $729,750 in high-cost markets.

Here are a few things you should consider from the BaltimoreSun:

•Contact your lender. Lenders are more open to working something out than they were even several months ago, whether that’s freezing your interest rate or temporarily forgiving payments you missed. Ask for the loss-mitigation department.

• Call a nonprofit housing counselor. They will act as a go-between and can have more luck getting to the right people. You can find a list of HUD-approved Maryland groups at www.hud.gov/foreclosure. Or call 888-995-HOPE.

• Inquire about a no-interest loan to get you current on your mortgage. The state of Maryland’s new Bridge to HOPE program offers loans of up to $15,000 to qualifying homeowners with subprime or exotic loans. Go to mdhope.org for details, or call 877-462-7555. City residents could also qualify for a $5,000 loan from Neighborhood Housing Services of Baltimore. You’ll need to be referred by a housing counselor.

• Refinance. The state has a Lifeline refinancing program - details at dhcd.state.md.us/Lifeline - and there is also the federal FHASecure, www.hud.gov/news/fhasecure.cfm.

• Sell. If you can’t do so for at least as much as you owe, ask your lender if it would approve a “short sale” and forgive the difference.

• Be wary of unsolicited offers of help. Foreclosure-rescue scammers are targeting homeowners.

Don’t forget about national nonprofits, NACA and ACORN. Let’s begin to make smart decisions about debt moving forward. There’s a lot of work to be done, but it starts with each of us. Making good personal finance decisions ensures that we will be in a good place financially 20..30..40 years from now.

How do you think we got here? Are you there now? Are you considering purchasing a home wthin the next 6 months? If so what are you doing to prepare for the purchase?

Read More:

Baltimore Finds Subprime Crisis Snags Women

Sub-Prime Lending, Women, and the Foreclosure Crisis

Women and the subprime crunch

Like what you’re reading? Check out Ginger at Girls Just Wanna Have Funds and subscribe to Girls Just Wanna Have Funds via email. If you have questions and want to get in contact with me, please see my contact page.

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ChooseCreditCards.com is a neat site that allows you to browse credit cards based on your needs and preferences. For example they have credit cards for students, 0% interest credit cards and reward credit cards. As I convince myself that I should have more than 2 credit cards my search will start here to see exactly what they have to offer. For instance I really like their Reward Credit Card offers because I can compare which credit best suits my needs based on my lifestyle. For example, Blue Cash® from American Express® is a fantastic reward card with the following features and benefits:

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Here’s the credit card review from the site:

Blue from American Express® is an ideal credit card for those with good credit who already have an established credit history and are looking for a card with access to a reward program.

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Sweet ehh? Go take a looksee for yourself! And remember, as with anything associated with credit, choose and use it wisely.

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Over the weekend I came across this article in The Washington Post, Lower Rates, Coming Resets: An Opening For Refinancing which discusses the onslaught of refinances due to the adjustable rate mortgages that are about to reset.

Here are some of the more salient points in the article. Homeowners with ARMS should pay close attention:

“Thanks to the lowest mortgage interest rates in a year and a half, nearly 60 percent of all new mortgage applications by mid-January were for refinancings, according to data compiled by the Mortgage Bankers Association. Rates this week were 5.69 percent for a 30-year fixed-rate mortgage and 5.21 percent for a 15-year fixed-rate loan, Freddie Mac said.”

“Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association, said “no-cost” refinancings — in which transaction fees are rolled into the interest rate — “are absolutely an option” for people who took out fixed-rate loans in 2006 or 2007 ,when rates were at or above 6.25 percent.”

“borrowers with a 6.5 percent fixed-rate loan might be able to refinance into a 6 percent loan without paying any fees at origination or settlement. The lender would simply add a quarter of a percentage point to a 5.75 percent 30-year conventional loan rate.”

“Assuming a $400,000 existing loan amount, homeowners could save $128 a month in principal and interest — $1,536 over the course of a year — by moving out of a 6.5 percent mortgage into a 30-year loan at 6 percent with no settlement costs.”
However, take caution:

“…in the past nine months, most national lenders have tightened underwriting rules and are now extra-cautious about appraisal accuracy, borrower equity and credit scores, especially in areas where prices have been soft or declining, Lipes said. As a result, owners who bought properties with minimal down payments a few years ago may find their appraised values lower and their equity positions insufficient to qualify for refinancing.

Absent appraisal issues, Lipes said, applicants with solid credit histories, documentable income and a lot of equity can readily refinance into fixed-rate mortgages at 5.63 percent to 5.75 percent, with no points and no cash out.

This is great news! Better than I thought it would be as not too long ago it was rather difficult for homeowners to refinance given the banks’ refusal to work with them on restructuring an ARM. But, I think reality has set in for most banks and they are realizing that foreclosing on the homes isnt a good look because they are stuck holding the note and property taxes on the home. So this is indeed a good time to refinance if you know that your ARM will be resetting to a monthly payment that you can’t afford. Avoiding foreclosure is key to protecting your credit and livelihood in this credit based society. So please, take advantage of hte low rates and secure your future.

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