Tearing Down the Wealth of Women
The author, a doctoral candidate at CUNY Graduate Center whose research centers on gender and wealth, writes about the hit women are taking in mortgage foreclosures.
While our national conversation is centered on unemployment, foreclosures continue to skyrocket. There is no relief in sight: the Center for Responsible Lending projects that an additional 10 to13 million foreclosures will occur before the crisis ends.
The sheer magnitude of this crisis hides the reality that women are the most severely affected by the problem. Research from the Consumer Federation of America has clearly documented how women, and particularly women of color, bore the brunt of the risky sub-prime lending practices in the 2000s. Even when women have similar credit scores, income levels, and property types as their male peers, they are 32 percent more likely than men to be saddled with these unpredictable and often expensive loans.
Until the last decade, the majority of home mortgages were traditional prime loans with a fixed interest rate. Borrowers could expect that their interest rate would not change from one month to the next. The rise of the sub-prime mortgage industry radically altered that expectation. A sub-prime loan is riskier than a prime loan because the interest rate can wildly fluctuate with changes in the market or the terms of the loan.
In the early 2000s, women became the fastest growing group of homeowners in the United States. The housing industry took notice, as female friendly real-estate brokers and home repair services quickly sprang up to meet the demands of women whom Realty Times labeled, “the rising minority.” At the same time that women began rising in the housing market, the sub-prime industry was rapidly dominating the traditional prime market.
Homeownership has been sold as the cornerstone of the American Dream, and this new crop of female homeowners had every reason to believe that the wealth they were carefully building with their home would be there to assist with their future. What many of them did not realize was they had either been steered or ill advised into signing a sub-prime loan.
In the 1970s, Debbie and her husband used their savings and wedding gifts to finance the down payment on their first home. They were living the American Dream with a traditional fixed prime loan and a growing family. Twenty years later, Debbie’s husband suffered a debilitating illness that left him unable to perform basic tasks. She found herself at the center of a financial storm as the family faced mounting medical bills. “It was all on me. The stress was unbelievable and I no longer had my husband’s help, but at least I had my house.”
By 2003 they could barely keep up with their bills. “Every time the phone rang I jumped,” she remembers. “For the first time in my life I had a doctor tell me that I had severe anxiety and depression. I actually thought about suicide.” When she sought assistance from social service agencies she received the same story again and again, “you still own your home and have a job, we cannot help you.”
Shortly after, Debbie’s mortgage was sold to a sub-prime company that is now at the center of thousands of consumer complaints for fraud. The terms of the new sub-prime loan went unnoticed in the piles of paperwork she signed, and she thought they were remaining the same as they had been for 30 years. Within 10 months the family was in default as the cost of their mortgage doubled. In hindsight she describes herself as “stupid for letting them take advantage of my vulnerability. I didn’t even negotiate with them. I thought they were on my side. I didn’t think they would want me to lose my house either because it would make them not have my money.”
What Debbie experienced is not unusual. It reflects a dark shift in the market, which is turning back the clock on women's ability to accumulate wealth. Financial analysts have long documented that women are more risk averse than men and have higher credit scores. Yet, women were over-represented as sub-prime borrowers in the housing boom, and are now at a higher risk of foreclosure. If women have higher credit scores, why did they receive the bulk of risky lending? If they are more likely to avoid risk than men, why do they have sub-prime loans when they qualify for prime?
Conclusive answers to the complex nature of those questions are still unknown. However, what we do know is that although women are beginning to close the wage gap, many are seeing that wealth stripped away by foreclosure. Furthermore, while many predatory lenders from the past decade are no longer in business, foreclosure prevention scams have risen in their place, asking for unnecessary pre-payments that mirror the exorbitant fees charged in sub-prime lending.
As Debbie’s home neared foreclosure she received an offer in the mail from a lawyer falsely claiming to be part of President Obama’s foreclosure prevention initiative. “I was getting all this mail from lawyers who were claiming they could help me out. I didn’t know where to turn. And then Obama was on TV, and he said there was a federal program to stop predatory lenders. The next day I got this one offer. It said ‘you have been selected for the Obama foreclosure prevention program.’ I thought this is it, this will help.” Debbie signed the paperwork and paid the attorney fees up front to stop the foreclosure. “I put a nail in my coffin when I did that. I gave him all the ammunition to get us. It turned out he never did anything to stop the foreclosure.”
For all that Debbie went through she took several steps that allowed her to recoup some of her losses due to the scam. First, she kept meticulous records—copies of every interaction with every company. Second, when social services turned her away, she called her congressman—often. “When the sheriff came the first thing I did was call the lawyer, and the number was disconnected. I went ballistic because I knew I had been taken. I began calling Congressman Sestak’s office regularly.” Since she had saved her paperwork, former Congressman Joe Sestak's staff was eventually able to track the lawyer who had also scammed many other people desperate to save their homes.
Although it was too late to help her, Debbie discovered later on that her county did have federal funds available through local non-profits to renegotiate defaulted mortgages. Single women who are managing the constant calls from their lender along with caring for their families, and working are at particular risk of not knowing what resources may be available if they do not have the time to search. Beginning by contacting your local government officials is an excellent way to start. Homeowners are taxpayers and voters. It is in the best interest of lawmakers to pay attention when their constituents are facing foreclosure. The costs of foreclosure affect the property values and municipal funds of entire communities, and your elected officials need to hear from people on the frontlines of a devastating crisis that can undermine the fiscal health of entire communities. Lists of HUD certified housing counselors are available on the HUD site along with tips for avoiding foreclosure scams.
The number one tip off that a proffered service is a scam is if they ask for any type of payment or power of attorney. True foreclosure prevention is conducted through non-profits, not through private enterprises attempting to collect fees. Women facing foreclosure need to know they are not alone. They are among scores of women who have been swept up in the Great Recession and who should expect help from government officials who represent them.
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