Posted May 30, 2007 09:32 pm CDT
An unprecedented epidemic of mortgage foreclosures on a single, upscale Detroit block is emblematic of similar scenarios in minority neighborhoods throughout the country that does not bode well for homeowners.
Once “redlined” by lenders (which is now an illegal practice under fair housing laws), minority communities in urban centers have received more than their share of subprime mortgages in recent years – particularly as homeowners have refinanced existing mortgages at higher amounts and taken cash out in order to make home improvements or purchase consumer goods. Today, the relatively high-interest, often adjustable-rate loans are haunting these communities with a huge number of distressed, foreclosed homes, reports the Wall Street Journal (sub. req.) in a page one article about this “debt bomb.”
“This is a phenomenon that I’ve never seen before, and I’ve lived here all my life,” says Carlton McBurrows, a community activist. “I think this is just the beginning.”
Meanwhile, even in relatively stable middle-class and upper-middle-class neighborhoods, homeowners are tightening their belts as the refi well has run dry, reports the Washington Post.
“Jeez, we’ve got all these payments every month,” says Amy Woodhull, 48, a radio network executive in Washington, D.C.’s Capitol Hill neighborhood. She rode the real estate boom with her husband and purchased multiple properties via cash-out refis on the rowhouse they bought for $250,000 in 1998 and renovated (it’s worth around $1.5 million today and mortgaged at half that value). “Now, when I look at sending my son to college in a year, I can’t refinance again. Rates aren’t falling… . I’m kind of stuck,” Woodhull says. “What are my options? Sell a property into a down market? I’m really feeling quite caught – like panicked caught.”