CLEVELAND — Catrina V. Roberts, a single mother of four, joined a new, growing class of minority homeowners when she moved from her subsidized apartment to a two-story house in 1999.
But Ms. Roberts fell behind on her payments and declared bankruptcy last year. Now, as she loses her modest home to foreclosure, Ms. Roberts may represent the vanguard of a worrying trend of retreat.
The housing boom of the last decade helped push minority home ownership rates above 50 percent for the first time in 2004 and the overall foreclosure rate below 1 percent. Social scientists laud these accomplishments because ownership can foster greater neighborhood stability and economic progress. President Bush cites rising minority ownership as a milestone achievement under his "ownership society" programs.
But hidden behind such success stories lies a disturbing trend: in the last several years, neighborhoods with large poor and minority populations in places like Cleveland, Chicago, Philadelphia and Atlanta have experienced a sharp rise in foreclosures, in some cases more than a doubling, according to an analysis of court filings and other housing data by The New York Times and academic researchers.
The black home ownership rate even dipped slightly last year, according to the Census Bureau.
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, most of which will jump to higher interest rates in the next two years, according to an analysis of data that lenders disclose under the federal Home Mortgage Disclosure Act.
Subprime loans, which are made to borrowers with credit histories that the industry considers less than prime, have interest rates that are, on average, three points higher than the prime rate, about 6.2 percent now, and they carry higher fees and prepayment penalties that make it expensive to refinance.
Some housing experts worry that the minority foreclosure rate could worsen if the economy or the housing market, nationally or regionally, hits a rough patch as it has in industrial Midwestern states like Ohio.
"Anybody who is on the edge, those are factors that can tip them over into foreclosure," said William C. Apgar, a lecturer at Harvard who has studied foreclosure patterns in Atlanta, Chicago and Los Angeles. "That could happen even though foreclosure rates are down."
The example of Ms. Roberts is noteworthy because her loan was not considered subprime. It came from KeyBank, a longstanding Cleveland institution, and carried a relatively low fixed interest rate of 7.4 percent on a principal of $65,000. She never had a credit card, much less a credit record, and put down only $2,000.
Over the years, Ms. Roberts's monthly expenses rose because of repairs to a dilapidated porch and the birth of two grandchildren, but the $880 a month she takes home after taxes from her job as a home health aide did not.
Ms. Roberts, 35, also receives $1,100 in Social Security benefits because two of her younger children have learning disabilities. "I know when you buy a house, eventually you have to put work into it," she said and sighed, "but I didn't know it would lead me here, because if I did I would have never bought it. So, I am at a point right now that I don't want to ever buy a house, ever again."
The Mortgage Bankers Association of America plays down the severity of foreclosures, noting that most new minority homeowners are doing well and that the Midwest is facing unique economic challenges. The trade group estimates that fewer than 1 percent of all loans were in foreclosure in the three months that ended last September, down from 1.5 percent in 2002. For subprime loans, the rate was 3.3 percent, down from 8 percent in 2002.
Trouble in Cuyahoga County
But broad national statistics can obscure hard local realities. In Cuyahoga County, which includes Cleveland, Ms. Roberts's hometown, court filings by lenders seeking to foreclose on delinquent borrowers totaled more than 11,000 in 2005, more than triple the number in 1995.
There were 17 auctions of foreclosed properties for every 100 regular single-family homes sold in the county in 2005, up from 10 in 2004 and 5 in 1995, according to data tabulated by Cleveland State University. (Not all homes that enter foreclosure are sold at auction; sometimes borrowers and lenders settle out of court or the property is sold on the open market.)
There is no way to know how many foreclosures of minority-owned homes have occurred in the Cleveland area, because county filings do not identify people by race. Experts say the closest proxy is the number of auctions of seized homes conducted by a sheriff as a ratio of conventional sales in areas with large minority populations.
In the eastern part of the county, which is 52 percent black and 7 percent Hispanic, the ratio of auctions to regular sales was 23 per 100 last year, up from 9 in 1995. In the west, which is 82 percent white, the ratio was 11 per 100, up from 2.5.
A similar pattern can be seen in Chicago, where foreclosure filings tripled, to 7,576, from 1993 to 2005. Neighborhoods where the population is more than 80 percent non-white account for 65 percent of all cases, up from 61 percent in 1993, according to data compiled by the National Training and Information Center, a housing advocacy and research group based in Chicago. The same trends have been documented in Atlanta and Philadelphia, according to researchers from Harvard and the Reinvestment Fund, a Philadelphia-based investment organization hired by the Pennsylvania Department of Banking to study mortgage foreclosures in the state.
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For Minorities, Signs of Trouble in Foreclosures
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