The White House issued a fact sheet on how President Barack Obama’s financial reform plan will affect African Americans.
Too many responsible African American families have paid the price for an outdated regulatory system that left our financial system vulnerable to collapse and left families without adequate protections. The Obama Administration’s plan will promote financial stability and protect African American families from the unfair practices that contributed to this crisis. The plan will establish a new consumer financial protection agency, which will have the power to set clear rules of the road and ensure that financial firms are held to high standards.
African American Families and the Financial Crisis
In 2005 and 2006, the height of the subprime lending boom, more than 53% of loans sold to African American borrowers to purchase homes and more than 49% of refinancings by African Americans were higher priced loans. [Federal Reserve, “Higher Priced Lending and the 2005 HMDA Data†(September 2006); Federal Reserve, “The 2006 HMDA Data†(December 2007)]
African American borrowers were over 3 times more likely to receive higher priced loans to purchase homes and over 2 times more likely to receive higher priced refinancing loans than nonâ€Hispanic whites in 2005 and 2006. [Federal Reserve, “Higher Priced Lending and the 2005 HMDA Data†(September 2006); Federal Reserve, “The 2006 HMDA Data†(December 2007)]
Borrowers who were sold subprime loans, including African Americans, have come under severe stress during the recent financial crisis and are at high risk of foreclosure. 48.5% of outstanding subprime loans sold in 2005 and 57.2% of such loans sold in 2006 are in foreclosure or no payment has been received for 60 days or more. [McDash Online Core Database data (February 2010); Treasury analysis.]
Growth in African American homeownership is reported to have reversed. Based on an analysis of Census data, the Pew Hispanic Center reported that “[b]lack householders raised their homeownership rate from 41.9% in 1995 to 49.4% in 2004. By 2008, the black homeownership rate had decreased to 47.5%‖still significantly short of the 74.9% homeownership rate for whites in 2008. [Pew Hispanic Center, “Through Boom and Bust: Minorities, Immigrants and Homeownership,†(May 12, 2009)]
African American Families Deserve Clear Rules and Strong Enforcement
About half (48%) of African American and other minority households carry a credit card balance, with a median balance of approximately $2,000. [Federal Reserve, “Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances,†(February 2009) (“SCFâ€)]
40% of African American and other minority households have mortgages and other debt secured by residential property, such as home equity lines of credit. The median amount owed is approximately $113,000. [SCF]
49% of African American and other minority households have installment loans, such as student loans and auto loans.
The median total balance on such loans is approximately $12,000. 36% have student and other education loans and 51% have auto and other vehicle loans. [SCF]
African American and other minority households invest in the financial markets, including for retirement. 39% of African American and other minority households have retirement accounts with a median amount of approximately $25,000. [SCF]
Too many responsible African American families have paid the price for an outdated regulatory system that left our financial system vulnerable to collapse and left families without adequate protections. The Obama Administration’s plan will promote financial stability and protect African American families from the unfair practices that contributed to this crisis. The plan will establish a new consumer financial protection agency, which will have the power to set clear rules of the road and ensure that financial firms are held to high standards.