In my previous post, I mentioned the hardships that many black women suffer because of the high rate at which they are given subprime loans, which lead them to be among the minorities who suffer foreclosures at higher rates. I cited some essays published in the 2008 edition of The State Of Black America, an annual report published by the National Urban League (NUL) since 1976.

The report also focused on black women in small business, the sectors in which most small businesses owned by black women are concentrated, the amount of revenue these businesses generate and how they might generate more.

"Businesses owned by black females employed more than 23 percent of workers at black-owned businesses," Lucy J. Reuben, a visiting professor at Duke University, wrote in an essay published in The State Of Black America. "More than 45 percent of BWBEs [black women-owned enterprises] concentrate in health/social services and retail trade industries. The health/social services sector alone accounts for more than 30 percent and the retail trade sector accounts for nearly 10 percent of BWBEs."

"Although BWBEs are concentrated in sectors generating low revenues, they paid
their employees more than $3.9 billion, which is an amount that could provide the
median U.S. household income for more than 75 thousand families. At the lower level of
median black household income, BWBEs provide payroll dollars that would be adequate
to support more than 110 thousand families," Reuben wrote. "As such, businesses owned by black females provide a source of revenue for household stability as well as increases in the tax bases of numerous states and municipalities."

Reuben also noted that businesses owned by black women employ one worker for every $74,000 of revenue the business generates. In contrast, all black-owned businesses employ one worker for every $87,000 of revenue and all female-owned businesses employ one worker for every $109,000 of revenue.

So, since businesses owned by black women employ more workers with less revenue, how do businesses owned by black women start generating more revenue, leading to more jobs and boosts to the economies of their communities?

"Recommendations for building upon the strength and success of BWBEs include
increasing the share of black women-owned business in higher skilled, higher
technology sub-segments of industries in order to increase revenue streams and profit
margins and increasing microfinancing opportunities for small start-up businesses," Reuben wrote.

Labels: Minorities, Small Business

I posted last week about the correlation between foreclosures and minorities. The National Urban League (NUL) released a report yesterday that provided additional numbers to back this pattern up, tracing the correlation back to subprime loans.

"With 45.8 percent of African-American households headed by women vs. 13.6 percent of white households, black women are particularly hard hit when considering issues such as subprime lending," according to a NUL press release about the report, called The State of Black America.

The State of Black America, published annually since 1976 by the National Urban League, covers issues critical to black America. Last year's report focused on black men and the current report focuses on black women. The report covers a wide variety of issues, but I am going to focus on one issue first: homeownership.

"Homeownership is a cornerstone of the American dream, and home equity an important path to prosperity as a foundation for acquiring other assets like a college education, a small business and a secure retirement. Fixing the subprime market is important, but homeownership can still remain within the reach of the less affluent if the focus is shifted toward encouraging a higher savings rate," Lisa Mensah, executive director of the Initiative on Financial Security, wrote in an essay published in the report.

Americans across the board are dismal savers (for more information, see our previous article on Americans' Negative Savings Rate). Mensah proposed a down payment savings account, called a Home Account, with a 50 percent government match on their savings--up to $5,000--that could only be used by first-time, low- and moderate-income homebuyers. In theory, this would decrease the dependency of such homebuyers on subprime loans and allow more of them to purchase homes they could actually afford. The ability to afford a home could boost the economic standing of black Americans.

"Nearly two-thirds of the wealth possessed by African-American families is in the form of home equity. Without homeownership, most of these households own very little and have few opportunities to build economic security," Andrea Harris, president of the North Carolina Institute for Minority Economic Development, wrote in an essay published in the report. "Half of all African-American households with children are headed by women; therefore, homeownership is an important economic advantage for these families."

These women face serious economic disadvantages, though. "Subprime loans have gone disproportionately to women, and...African-American and Latina women have the highest rates of subprime lending when compared to all other Americans, especially white men who receive the lowest share of subprime loans," Harris wrote.

"Over half of all loans made to black borrowers in 2005 and 2006 were subprime…African-American women account for 48.8 percent of all African-American subprime borrowers in 2006," she wrote. "The subprime mortgage crisis will drain $213 billion in wealth [from] black Americans, producing for African Americans the greatest wealth loss in modern U.S. history."

Not all the news in the report was so dire, though; check back later for my post on small business ownership among black women.

Labels: Foreclosures, Minorities

"The housing boom of the last decade helped push minority home ownership rates above 50 percent for the first time in 2004," according to a New York Times article.

Subprime lending allowed those who perhaps couldn't truly afford homes to buy them anyway. Now that interest rates are readjusting and mortgage payments are skyrocketing, many people are being forced out of their homes.

"The increase in foreclosures could be the first of a wave of financial distress for many minority homeowners, experts say, because they are twice as likely as whites to have taken out expensive subprime mortgages," according to the article.

"Neighborhoods where the population is more than 80 percent non-white account for 65 percent of all cases" of foreclosure activity, according to the article, which cites data from the National Training and Information Center. "The same trends have been documented in Atlanta and Philadelphia, according to researchers from Harvard and the Reinvestment Fund."

"For all the talk of expanding opportunities to the less well-off [by providing mortgages to borrowers with low income and little to no down payment or credit history], experts note that the gap between minority and white home ownership remains unchanged from a decade ago at about 25 percentage points," according to the article.

"Minorities are far more likely to receive subprime loans than whites. About 30 percent of home purchase loans made to blacks from 1999 to 2004 and 20 percent of home loans made to Hispanics were subprime," according to the article. These are the homeowners whose mortgages are readjusting, who can no longer afford their monthly mortgage payments, who are facing foreclosure.

What really needs to be expanded--to minority communities especially--is personal finance education. People need to understand how to save, borrow and invest responsibly. Many people who are now facing foreclosure didn't understand the situation they were getting themselves into when they signed those mortgage documents.

Labels: Foreclosures, Minorities