Single women slammed by housing mess

While the real-estate market was expanding, single women benefited as never before. But when the boom went bust, guess which segment was among the biggest losers.

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By David Koeppel, MSN Money

Eviction was not an option: That's what Melonie Griffiths-Evans kept telling herself, even after the bank had foreclosed on her home in 2007 and was preparing to oust her so the house could be resold.

After a series of financial setbacks, including the loss of a job, the single mother of three had fallen hopelessly behind in her mortgage payments. But Griffiths-Evans, 38, wanted dignity for herself and her children, a way to negotiate their departure without being thrown out.

Listen to Griffiths-Evans' story

The Boston resident concedes that her home in the Dorchester neighborhood, assessed in February at $265,000, was basically unaffordable when she purchased it in 2004 for $470,000 with no down payment. She had taken out two loans in order to buy the home without private mortgage insurance -- one at 8.5% on 80% of the purchase price and the other at a whopping 12.5% on the remaining 20%. Her monthly payments totaled about $3,500, but, she says, she was assured by her lender that she could soon refinance into a lower-cost fixed-rate mortgage.

But she found herself unable to refinance, and the lender, whom the state attorney general eventually barred from making loans in Massachusetts, stopped returning her calls.

Unfortunately, troubles like Griffiths-Evans' are becoming more and more familiar.

Over the past decade or so, single women have become a major force in the housing market. The proportion of single female homebuyers climbed from 14% in 1995 to 22% last year, according to the National Association of Realtors. And by 2010, single women will make up about 28% of homeowners, Fannie Mae estimates.

But those gains haven't come without a price. Several studies have shown that women -- and women of color, in particular -- are more likely than men to be targets of subprime and predatory lenders, and that many of the women who have lost their homes to foreclosure could have qualified for lower-cost loans. And although there are no data comparing foreclosure rates between men and women, subprime loans have a higher rate of default. So with foreclosures soaring, experts say women are at particular risk of losing their homes.

Anita Hill speaks on the issue

"Even women with similar incomes as men were more likely to get subprime loans," says Anita Hill, a professor of law, social policy and women's studies at Brandeis University in Waltham, Mass. "Women were more likely to get subprime loans, and African-American women were even more likely. Women were advised

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they weren't qualified for prime loans, and in many cases that was erroneous information."

Even women at high socio-economic levels were more likely than men to receive subprime mortgages and other loans, according to a December 2006 study by the Consumer Federation of America. Women earning double the median income were 46.4% more likely to receive subprime mortgages -- which carried interest rates at least 3 percentage points higher than the standard lending rate -- than men with similar incomes, the study said.

The numbers were even worse when race was factored in: African-American women earning double the area's median income were nearly five times more likely to receive subprime mortgages than their white male counterparts.

About 75% of the women facing foreclosure in the Washington, D.C., area between 2005 and 2007 could have qualified for better loans, according to one study by the Urban Institute, a think tank for economic and social policy.

"There's a lot of blame to go around," says Alan Fishbein, the director of credit and housing policy at the Consumer Federation. "The borrower has to take some of the blame, but the mortgage industry gets most of the blame for the current crisis."

Fishbein suggests the reasons for the disparities are numerous and open to interpretation. Single women's wealth and earnings lag behind those of men and married couples, so these women have more difficulty obtaining credit even though their credit scores are generally higher. Another study says women are more reluctant than men to bargain for the best mortgage deals. And then there's always the specter of gender and racial discrimination.

Among the "highly toxic" loans marketed to women, Fishbein says, was the 2/28 adjustable-rate mortgage, usually starting with fixed payments at a "teaser" rate, often about 7.5%, and then two years later switching to an adjustable rate, initially rising about 4 points. Many borrowers who tried to refinance after the two-year teaser period could not. As home prices in their areas plummeted, the women's mortgages had become greater than the value of their homes.

Many people were deceived by these low teaser rates, says Stuart Katzenberg, the head organizer of the Maryland chapter of the Association of Community Organizations for Reform Now, or ACORN, a nationwide grass-roots advocacy group. The real impact was often undisclosed or hidden in hundreds of pages of paperwork, he notes. Many borrowers simply weren't aware that their fixed-rate mortgages would convert to adjustable-rate and/or balloon-payment mortgages, which require the owners to pay the entire principal loan balance after several years.

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Darina Tolano, a housing counselor for Neighborhood Housing Services in Phoenix, has witnessed the fallout firsthand. In May, she was receiving 50 foreclosure-related phone calls a day -- although that has dropped since the state set up an emergency hot line -- with many of her clients single and recently divorced mothers facing potential default or foreclosure.

"I do see more single women facing foreclosure," she says. "It's very emotional. People are in such an emotional state that it's difficult for them to focus on what needs to be done. They cry; they don't know what else to do."

Recently, Tolano counseled a single mother with a subprime adjustable-rate mortgage who was in danger of losing her home. Because she earns more than her ex-husband and they share child custody, she pays child support while also juggling loan payments on the house. She can't afford the mortgage's rising interest rates and isn't able to refinance at a better rate.

Tolano recently sent a proposal to her lender requesting a lower mortgage payment but knew the lender might reject the proposal.

In Griffiths-Evans' case, having an advocate bought her some time and dignity. Earlier this year, the organizational muscle of City Life/Vida Urbana, a local community activist group, helped her block two eviction attempts. City Life organized a "blockade," a grass-roots protest on Griffiths-Evans' front porch aimed at publicizing her plight and pressuring the lender into discussing options other than eviction.

The tactic worked, says Steve Meacham, City Life's tenant organizing coordinator. After first giving Griffiths-Evans time to try to find a buyer, the lender permitted her family to stay in the home for three months. When a buyer didn't materialize, the lender gave her an additional month to find a rental apartment.

Deborah Williams, 39, a single mother who lives in the Roxbury section of Boston and lost her home in an eviction she's now challenging in the city's housing court, says lenders are a big part of the problem.

When buying the house in 2002 for $430,000, she hired a real-estate lawyer -- referred by her lender -- to make certain she would avoid any financial pitfalls. But she says now that she's had nothing but pitfalls.

'I was baited and switched'

Williams believed she had obtained a fixed-rate mortgage at 6.8%, but within two years the rate adjusted to 10%, and her monthly payment rose from $1,400 to $3,800. After falling behind in her payments, Williams filed for bankruptcy protection.

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She acknowledges that she made mistakes, but she also believes mortgage lenders need to share responsibility and be more closely regulated.

"There are guidelines that need to be revised, laws that need to be changed," Williams says. "If you're given fraudulent loans, someone needs to go to jail. Someone needs to be held accountable."

Produced by Anh Ly

Published Aug. 25, 2008

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