Blacks buying in home slump

Realtors see trend as sign of a closing ownership gap

October 05, 2007|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

Home sales in Maryland dropped sharply last year, but black buyers were the exception.

They took out slightly more loans for home purchases than in 2005, a marked contrast to the big decrease in buying among white and Asian borrowers, according to an analysis of federal data released yesterday by Genworth Financial Inc. and Compliance Technologies Inc. Whites in Maryland took out 23 percent fewer loans, while loans to Asian borrowers fell 35 percent -- among the biggest drops in the nation for both groups.

Hispanic buyers in Maryland also took out fewer loans, but the decrease was 2 percent, much less than the overall slump in sales statewide.

Real estate professionals concerned about lower homeownership rates for blacks than for whites were buoyed to see signs of a catch-up in the numbers.

"We're trying to close that gap," said Joy Jamison, president and founder of the Clinton-based National Association of Black Mortgage Brokers. "It's an excellent thing for the community ... because that's what we're striving for -- because homeownership is moving toward wealth."

While black and Hispanic buyers were a stabilizing factor in the housing market last year -- nationwide and in Maryland -- those purchases could prove problematic for the homeowners, the housing market and the economy as a whole, advocates fear.

More than 40 percent of the black and Hispanic borrowers in Maryland and the nation last year got subprime loans. Rapidly rising default rates among these higher-risk, higher-cost loans, which helped fuel the housing boom, are contributing to the slump that began last year. The fallout has pushed some lenders into bankruptcy. If the 2006 subprime loans go bad as quickly as experts predict, foreclosed homes would flood markets already flush with for-sale signs.

Because subprime loans are intended for higher-risk borrowers, they traditionally have a higher chance of foreclosure and higher interest rates to account for that. But in the last few years, most of those loans also came with adjustable rates, which increases the odds that borrowers will run into trouble because their payments can rise significantly.

The Center for Responsible Lending, which has criticized loan terms given to subprime borrowers, says that about one in five U.S. and Maryland homeowners who got subprime loans last year will end up losing their homes. It was a particularly bad lending year, the center said, with "extremely stretched" borrowers put in loans they could ill afford just as the housing market was taking a turn for the worse.

"If this is not sustainable homeownership, I don't see that it's done any favors to the families who have acquired these homes -- and in some cases have put savings that took them years to acquire on the line," said Keith Ernst, senior policy counsel for the Durham, N.C., group.

Compliance Technologies called the level of subprime lending to minorities "troubling." The company, a consultant to the mortgage industry, and Genworth, whose businesses include mortgage insurance, are among the sponsors of a diversity conference for lenders that concludes today in Arlington, Va. Their report uses federal data on first-lien mortgages for home purchases.

The groups want to help increase minority home-buying, but "we want to do it the safe, sound, secure way, minimizing risk," said Lori Jones Gibbs, vice president of affordable-housing industry affairs for Genworth.

Phillip R. Robinson, executive director of Civil Justice Inc. in Baltimore, said he's seen many borrowers who were put in subprime loans even though they would have qualified for lower-cost prime products. "The subprime products are much more profitable for the originator," he said.

M. Gayle Briscoe, a Realtor with Coldwell Banker Residential Brokerage in Ellicott City who works with many black homebuyers, said few of her clients get subprime loans. Even fewer have lost their homes to foreclosure in her 37 years as an agent, she said. She points her first-time buyers to government programs such as Maryland's More House 4 Less, which offers mortgages with low-interest rates that do not adjust.

She said it makes sense that sales to black borrowers did not slump last year but instead rose by a fraction of a percent, to about 27,000. That was more than a quarter of all loans to homebuyers whose race was reported.

"There's increased awareness in the African-American community about the benefits of homeownership," said Briscoe, noting that many buy homes and their friends follow suit. "Also, increased earnings in the African-American community allow more people the flexibility to be able to consider a purchase."

For Jamalden Gowans, 30, the reason was simple: He "didn't want to turn 30 without owning a home." He got his finances in shape so he wouldn't feel stretched, found a nice rowhouse in Baltimore's Belair-Edison neighborhood and got a prime mortgage with a fixed rate.

"A lot of friends had just bought," said Gowans, who works as a teacher and therapist at Kennedy Krieger Institute. "It just felt like the right time."

Michelle and William Holmes, who like Gowans were clients of Briscoe's, also decided to buy a home in the city. Each has owned a home before, and William Holmes used to work in the mortgage business, so they felt confident about the process.

They settle on their $315,000 house this month.

"I have quite a few friends that are looking for homes right now, or they've recently purchased homes within the last year or so," said Michelle Holmes, 36, a human resources director. "There's certainly conversations about how the market has changed and how it's a little more difficult for people to get loans, but I don't think that's slowed my friends down. It certainly hasn't slowed us down."

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