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Keywords: United for a Fair Economy, subprime loans, ARMs, mortgage, interest rates, low-income, refinance, National Council of La Raza, Hip-Hop Action Summit Network, Russell Simmons

Imagine receiving a call from a mortgage company promising you a lower monthly mortgage payment if you refinance. But you may need to pay a slightly higher amount for a few months prior to the lower rate taking effect.

Sounds good, right?

That's what millions of Americans thought too--especially Black and Latino homeowners, many of whom were first-time buyers.

A report titled "State of the Dream 2008: FORECLOSED" by United for a Fair Economy pinpoints how mortgage companies and banks targeted people from traditionally underrepresented groups with subprime loans.

In addition, the report illustrates how severely affected the Black and Latino communities are because of the foreclosures. "The subprime lending debacle has caused the greatest loss of wealth to people of color in modern U.S. history … between $164 billion and $213 billion for loans taken during the past eight years," the report states.

Furthermore, the report situates the subprime crisis within "a long tradition of economic, and more specifically, housing discrimination in the U.S."

Subprime mortgages recently have expanded greatly. With higher interest rates and higher fees and penalties than conventional mortgages, subprime loans qualify individuals who otherwise couldn't get a loan because of low income or bad credit history. But buying into the American dream using subprime loans has forced millions of families to give up their homes because they can't keep up with the higher interest rates and other charges.

The same report shows that by 2006, more than one-fifth of all mortgages in the United States were subprime. Middle-class families and low-income families with serious financial setbacks who were interested in homeownership were targeted. First-time buyers were attracted to these loans (11 percent) as well as existing homeowners who wanted to refinance their homes (89 percent) to offset another expense, such as healthcare costs, unemployment or credit-card debt. 

On average, Black and Latino people are poorer than white people, so those offering predatory loans zeroed in on these communities. "Thus, if subprime loans were meant to target households whose income was not high enough to qualify for conventional loans, this meant a majority of households of color," the report states.

According to a 2006 study by the Center for Responsible Lending, even when income and credit risk are equal to white borrowers, Black borrowers are 31 percent to 34 percent more likely to receive higher-rate subprime loans than whites.

As a result of the Center for Responsible Lending's study, the NAACP sued 12 national mortgage-lending companies for discriminatory practices.

The National Council of La Raza (NCLR) got involved on behalf of the millions of Latinos affected by predatory loans. Two out of five Latino borrowers have adjustable-rate mortgages (ARMs), which reset their interest rates to a higher percentage, according to NCLR. In 2008 and 2009, about 1.8 million ARMs are scheduled to reset, according to the U.S. Treasury Department. Latino homeowners count equity as about 88 percent of their net worth, so anything that could eliminate some of that equity would, in turn, erase Latino wealth, according to NCLR.

But there is hope: NCLR hosts a series of financial-literacy classes aimed at educating Latinos on the housing crisis and how to survive it, for instance.

"What makes offering this information different now than in the past is the state of the economy and the tide of foreclosures," Katherine Dillard, senior community-development specialist for NCLR, told the Houston Chronicle.

Just yesterday, the Hip-Hop Summit Action Network announced an initiative to help with the mortgage crisis among Blacks and Latinos. Cofounders Russell Simmons and Dr. Benjamin Chavis held a press conference to inform the public about "Get Your House Right!" This is a program targeting young Blacks and Latinos between the ages of 18 and 35.

"For me, it's an expansion on what we have been doing. For the last three years, we've been doing hip-hop summits around the country on the subject of financial literacy," says Simmons. "The mortgage crisis is something that we're all faced with, and with people who have had a struggle just understanding their credit, this is something that is necessary. It's not taught in schools."

Simmons, along with sponsor Genworth Financial and other professionals from the financial arena, agree that hip hop can be utilized as a component to educate young people on the importance of homeownership in America.

"They're not taught financial literacy in school and the previous generation hasn't had access or the education either," says Simmons. "Many times [in underserved communities], the parents don't know and can't pass down the information to their children. We focus on [ages] 18 to 35 as a part of our core, and they come out and listen to Jay-Z speak."

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