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Oakland in dire need of economic recovery plan
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The State of California Employment Development Department issued an “immediate release” yesterday, announcing that the metropolitan division of Oakland-Fremont-Hayward reached a 10.2% unemployment rate in March of 2009. Last year this number was 5.4%. This means the unemployment rate in Alameda County has doubled in just one year.
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This is really disturbing news. However, if you look at the studies conducted by the Center for Responsible Lending in 2006 -- which predicted the housing bubble would burst in the year 2008 – the unemployment figures should come as no surprise. Given that unemployment and foreclosure rates are closely linked, it is clear that the sharp rise in unemployment is a direct result of the “foreclosure crisis,” a disaster brought about by the subprime lending industry. Clearly, the mortgage lenders, with their predatory tactics, need to be held accountable for the Great Recession.
According to Yahoo, there were 3,967 foreclosure sales this weekend in Oakland. This again is no surprise. Oakland, with its diverse population of low-income residents, was exceptionally vulnerable to the subprime market because of the thousands of small or “fixer-upper” houses offered at low-interest rates for first-time home buyers. The problem with these “affordable” loans is that they were offered in the form of two- or three-year “adjustable rate mortgages” (ARMs) procured by unscrupulous brokers for individuals and families whose incomes clearly would not cover the mortgages once the ARMs expired. I know this for a fact. I was one of those individuals.
While it is universally acknowledged that today’s recession resulted from the “mortgage meltdown,” the reasons why borrowers were steered into subprime loans in the first place are noticeably absent. Conservatives all over the country like to blame the individual borrowers saying, “If they couldn’t afford a home, they shouldn’t have bought one in the first place.” That’s easy to say for those who have never suffered from disability, unemployment, limited income, race discrimination, or just plain bad timing.
When I was house-hunting in Oakland back in 2004, I was assured by my mortgage broker that I would be eligible for a 30-year fixed loan. With heady excitement, I set about finding a modest, one-bedroom place and found one on the banks of Lake Merritt. I made an offer; it was accepted. At the last minute, I was jerked around by my lender and told that my “debt ratio” was too high for my income, but that “we can put you into an 80/20 loan with a nice, little three-year ARM so that your monthly payments will be affordable.” Having been already in escrow, and determined to become a homeowner, I agreed. This is how many people were tricked. Certainly, I could have backed out at that point, but the lure of the “American Dream” was too great. Instead, for me and thousands of others in Oakland, (3,967 this weekend alone), the “American Dream” turned into a nightmare.
In the fall of 2007, right as my three-year ARM expired, I did some research into the effects of subprime lending. What I found was horrifying. I learned that the metropolitan area of Oakland-Fremont-Hayward was projected to sustain a 359% increase in foreclosures for the year 2008. This projection placed Oakland as one of the top cities at risk in the country. While these findings by the Center for Responsible Lending were available to the federal government, the Bush Administration simply ignored them and continued to allow banks and mortgage brokers to profit by their unregulated methods. In fact, the federal government was on notice about the predatory nature of subprime loans as early as 2000 when the HUD, presenting its Housing Policy in the New Millennium in Washington, DC, advised that there were high foreclosure rates on subprime loans, and that “the variety of forms which predatory practices can take suggests that predatory lending is a serious issue for low-income, minority, and elderly families in both urban and rural areas.”
Today, we are seeing the results of these portentous studies all over the country, and especially here in Oakland. I wish there were some good news here, but frankly, only time can turn the market back around. In the meantime, those now affected by foreclosure and/or unemployment will need assistance from all avenues possible.
On February 18, 2009, the Obama Administration announced its $75 billion dollar plan designed to help families prevent foreclosures and “stabilize hard-hit communities” by offering loan-modification programs and refinancing opportunities for borrowers otherwise ineligible because their homes had decreased in value. Clearly, Oakland, with its double-digit unemployment rate, fits into this category.
In the meantime, there are agencies offering assistance to the unemployed and those at risk of losing their homes. If we can all weather this storm together, there is hope that Oakland and its neighboring cities can bounce back from this devastating economic plunge.
For assistance, see:
Sources for this article:
Fishbein, Allen and Harold Bunce, 2000. “Subprime Market Growth and Predatory Lending” Housing Policy in the New Millennium, Washington, DC, http://www.huduser.org.
Schloemer, Ellen, Wei Li, Keith Ernst, and Kathleen Keest, 2006. “Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners,” Center for Responsible Lending.
Singh, Delva, 2009. “Immediate Release Oakland-Fremont-Hayward Metropolitan Division,” State of California Employment Development Department http://www.calmis.ca.gov/file/lfmonth/OAK$PDS.
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