The defaults are concentrated among working people with federally guaranteed loans under the Federal Housing Administration (FHA). As bosses have cut jobs and hours since the onset of the economic recession, many who borrowed during the 1990s "boom" years can no longer keep up with payments. Racist discrimination in lending policies has also played a role, since many Blacks are denied bank loans and must pay sharply inflated interest rates to even less scrupulous lenders.

The rate of default across the country on federally insured loans has doubled in the last decade. A default is defined as being more than 90 days behind on monthly mortgage payments. In the New York area the mortgage default rate so far this year is three times the national average, reaching nearly 12 percent in the metropolitan region. The rate has steadily climbed from just over 2 percent in 1994.

"It looks to me like the American dream is, for some people, becoming the American nightmare," said Dolores Martin, a home ownership counselor for Jamaica Housing Improvement Inc., a nonprofit agency in Queens, New York. Martin said the agency's offices have been barraged by working people who are trying to forestall foreclosures on their home loans.

One of Martin's clients is a flight attendant who lost her job after September 11. She is married to a cabdriver whose income also plummeted after the attack on the World Trade Center.

Pamela Sah, an attorney with the Foreclosure Prevention Project of South Brooklyn Legal Services, said her caseload has doubled among clients holding FHA loans. "Beginning late last year, we started getting slammed," she said.

Between last October and mid-March this year both banks, and big or small-time capitalist operations that line up loans at even higher interest rates, filed nearly 500 more foreclosure claims against people in Brooklyn and Queens than in the same period a year earlier--an increase of more than 20 percent.  
 
Racist lending policies
Working people who are Black are routinely denied loans and credit from conventional banks and financial institutions. The results of a recent survey of some 200,000 home loan applications "suggested that racial discrimination continues to be a factor in the way banks issue loans," said a politely understated article in the New York Times.

The "suggestion" of racist practices by the banks comes in a study commissioned by New York senator Charles Schumer. The results show that banks reject loan applications from Blacks at nearly twice the rate for whites, even when they have similar incomes. Overall, 28 percent of Black people who applied for loans were turned down compared with 15 percent of whites. Where Blacks earned a higher income than whites, they were still rejected more often for loans. For example, 26 percent of Blacks with incomes above $67,440 were denied loans, compared with 19 percent of whites earning less than $45,000.

As a result of these racist lending policies, many Black working people turn to predatory "subprime" lenders who charge high interest rates and hefty fees. Some have arranged FHA mortgages, charging inflated fees, and then have profited again when the buyer was forced to default. Schumer's study showed that in 2000, loan sharks dominated the market in Black neighborhoods, providing 43 percent of the home loans there compared with only 9 percent of these loans in white neighborhoods.

An analysis the loan applications by residents of Laurelton, Queens, a Black neighborhood with an average income of $63,527, revealed that banks rejected 30 percent of loan requests and subprime lenders provided 36 percent of the loans. In a comparable white neighborhood in Queens, Bayside, with an average income of $57,212, banks rejected only 12 percent of the loan applications, and subprime lenders provided 8 percent of the loans.

Senator Schumer said that "after years of mistrust, years of discrimination, many Black homeowners simply do not want to risk the humiliation of having their loan applications turned down. As a result," he said, "many Black homeowners who are more than qualified to receive low-interest loans from conventional lenders don't even apply."  
 
 
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