financial literacy
BY ERIC L. HINTON
don’t be a victim
How Black & Latino Homebuyers
Can Avoid Subprime Loans
“Subprime”—such a small word to
carry such dire ramifications. Then
again, it’s not really the word “subprime” that has
homeowners losing sleep at night. It’s the more
ominous words such as “foreclosure,” “bankruptcy”
and “homelessness” that have so many borrowers on
edge, wondering how much longer they’ll have a roof
over their heads.
It’s a devastating cycle that begins at what should
be one of the happiest times of your life: buying a
home. But if you’re black or Latino, specifically, and
you signed up for a mortgage but found yourself
unable to qualify for a “traditional” loan because of
high debt, low income or past credit history, it’s likely
you signed on for a subprime loan.
Worse yet, if you’re black or Latino, you may have
been thrust into the subprime market regardless of
your income or credit history, according to advocacy
groups such as ACORN (Association of Community
Organizations for Reform Now). Fannie Mae estimates
that up to 50 percent of borrowers with subprime loans
could have qualified for more affordable mortgages.
WHO IS RESPONSIBLE?
You might think it would be smaller, “no-name”
lenders that would target blacks and Latinos for
these high-interest loans. You’d be wrong.
Countrywide Financial Corp., the nation’s largest
home-mortgage lender, is also the nation’s fourth-largest subprime lender, according to CNBC. But
despite mounting criticism, Countrywide Chief
Executive Angelo Mozilo said earlier this year that he
believes the subprime backlash is an “overreaction”
and defended the practice as the only option for many
black and Latino homebuyers.
“The only way that lower-income and minorities
can get into middle income is through buying a home,”
Mozilo said in an interview on MSNBC. “And there is
