The foreclosure crisis may feel like the distant past, but its aftermath continues to haunt our neighborhoods, especially in working-class communities of color. The housing crisis is compounded by rising rents and an insufficient supply of affordable housing.
African-American and Latino homeowners that were disproportionately targeted for predatory subprime mortgages were much more likely to lose their homes when the housing bubble popped. The foreclosure crisis has created a new bubble in skyrocketing rental prices, and working families that have lost their homes are now finding themselves priced out of the rental market as well.
In Richmond, from 2009-2012, cash buyers purchased nearly half of all homes sold. The percentage of absentee buyers -- buyers who have property tax bills sent to a different address -- climbed every year during this period. More and more of our housing stock is shifting from homeownership to ownership by investors who often don't even live in our city.
The city of Richmond is working hard to prevent further displacement and preserve our multi-income community, knowing that working-class families -- particularly African Americans and Latinos -- in nearby cities like Oakland and San Francisco have experienced large-scale displacement. This slow purge has been going on for years as gentrification has hit our region, but it has accelerated in the aftermath of the housing bust.
Some of the biggest culprits in this displacement include Fannie Mae, Freddie Mac, and Wall Street speculators. Across the country, hundreds of thousands of homeowners are still facing foreclosure.
Rather than taking meaningful steps to help these families stay in their homes by reducing the principal on their mortgages, Fannie Mae and Freddie Mac are giving communities of color the final push out the door by selling off tens of thousands of troubled loans, at a discount, to Wall Street speculators.
In mid-February, Fannie Mae plans to conduct its largest sale yet -- 6,700 mortgages.
When hedge funds and private equity firms purchase these loans, they typically force the homeowners out -- through foreclosure, or short sale -- and turn the homes into expensive rentals, driving up rents throughout the neighborhood.
The Blackstone Group, one of the world's largest private equity firms, is now also the largest owner of single-family rental homes in the U.S. This doesn't just push families out of their homes; it also pushes working-class communities out of their neighborhoods by pricing them out of the rental market.
Fannie Mae must reverse course, before it's too late. It needs to work with city governments and community stakeholders and get these troubled loans into the hands of non-profits that will help keep families in their homes.
There are a growing number of Community Development Financial Institutions (CDFI's) that have raised capital and are ready and willing to buy these delinquent mortgages and work with struggling families.
CDFI's use principal reduction to help modify and make affordable bad mortgages. When it's truly not possible to avoid foreclosure, these non-profits work to develop property disposition plans that address the affordable housing needs of the surrounding community.
Unfortunately, Fannie Mae and Freddie Mac continue to sell tens of thousands of delinquent mortgages to the highest bidder, meaning Wall Street hedge funds and private equity firms.
In the past five months alone, they have sold more than 10,000 loans to Wall Street hedge funds and private equity firms. These delinquent mortgages are tied to struggling homeowners and homes in our neighborhoods. Selling off our housing stock to Wall Street is insane.
We have an opportunity to preserve homeownership, increase affordable housing and slow the speculator buy-up of our neighborhoods. Thankfully, community groups, non-profit housing agencies and cities are uniting to push for this solution. I'm hoping more elected officials and community leaders join me to stand up to this Wall Street takeover.
Wall Street speculators got rich creating the housing crisis that wreaked havoc on our communities -- and communities of color especially. They should not be allowed to get rich again by scavenging on the remains of the neighborhoods they have already ripped apart.
Fannie Mae and Freddie Mac need to change their "distressed note sale" program so that prioritizes rebuilding neighborhoods by selling delinquent mortgages to non-profits that will help keep families in their homes and communities of color from being displaced.
A first and important step would be consulting with community leaders and non-profits ahead of this February's sale. I hope Fannie Mae will make the right choice.
Gayle McLaughlin is a member of the Richmond City Council.