On the popular game show Who Wants to Be A Millionaire? contestants are offered “lifelines” when they get stumped by a question, or aren’t 100 percent sure of their answer. One of those lifelines is to “phone a friend” to seek coun
On the popular game show "Who Wants to Be A Millionaire?," contestants are offered “lifelines” when they get stumped by a question or aren’t 100 percent sure of their answer. One of those lifelines is to “phone a friend” to seek counsel.
Recently, the devastating economic news on Wall Street left me feeling as if I needed a lifeline to provide me with some answers about what all the bankruptcies, buyouts and bailouts mean to me, my community, my city and Black people, in general.
The proposed $700 billion government bailout may sound like news from a faraway country to some. But there’s a Wall Street in every community in America when the nation’s lending institutions are having problems like these.
Still, I wasn’t sure what to make of it, so I called my lifeline on the economy, Steve Rogers, the Gordon and Llura Gund Family professor of entrepreneurship at the Kellogg School of Management at Northwestern University. I asked Rogers, an economist, if everyday Americans and Black people in particular should be concerned about the crisis on Wall Street.
His answers: Yes and oh, heck yes.
Rogers explained to me that not only will the current financial crisis make it harder for people to get loans and spark more layoffs over the coming months, but it actually poses possibly the greatest threat ever to African American solvency and wealth creation.
Therefore, if the question is: What got us into this mess? The choices could be: A.) subprime lenders who put qualified people into high-interest loans; B.) relaxed credit standards that led to the approval of loans that were higher than the property’s value; C.) a lack of education about how to avoid high-risk loans among its most frequent victims; or D.) all of the above.
My lifeline says D. And I have no doubt he’s correct. Nationally, 40 percent of foreclosed loans belong to African Americans. What’s amazing, Rogers said, is that 50 percent of those folks who had subprime mortgages could have qualified for a traditional mortgage.
Evidence is mounting that the foreclosure crisis could become the worst financial debacle ever in Black America. Rogers called it a “travesty” in the Black community and predicted that it would ultimately “set us back further.”
“We had made some major gains in homeownership. A disproportionate number of Black folks lost their homes, so this will have a negative effect on the amount of wealth we control as Black people,” Rogers said.
That number is already low–Blacks control about 3 percent of the wealth in America.
I had to pause for a moment and catch my breath as Professor Rogers explained how the economic fallout had already led to a tightening of credit rules, making it tougher to get a loan to buy a house or a car.
“The banks are getting stricter with the lending criteria,” Rogers said. “Three years ago, a person who had a credit score of 600 could get a mortgage. Today, the minimum is 690,” he explained.
In Chicago, the stricter standards will mean a whole lot of new homes and condos will remain unsold, and already struggling communities will be even more hard-pressed to attract investment.
The increase in layoffs, Rogers predicted, will lead to an increase in entrepreneurship, but even there, owners will encounter more barriers accessing capital. “It will impact Black people’s ability to own businesses and to send their children to the best schools,” he said.
But there is hope, he said. Whew! “There’s never been a time in recent history where banks have been more (willing) to work with homeowners as they are now,” Rogers said. “Don’t put your head in the sand; fight to keep your house. Stay in those homes as long as you can. It’s going to be hard to get another home mortgage in the future.”
Meet with your lender and tell them what you can afford to pay each month, he said. And to tide you over, don’t rule out taking in a tenant or getting a part-time job. You won’t be the only one. “This could take years to dig out from underneath,” he said.
Then I say let’s start digging. We cannot afford to roll back the clock on Black economic progress. It’s time to say goodbye to “bling” and start saving our money. It’s time to live within our means and mean how we say we want to live.
Get credit counseling. Workshops on how to avoid foreclosure are everywhere these days. The Chicago Urban League provides counseling for those at risk of foreclosure and will take a proactive role in helping participants through the process of fighting for their homes. More information is available at www.thechicagourbanleague. org or by calling 773-285-5800.
You never know; it could be your lifeline.
Cheryle R. Jackson is the president of the Chicago Urban League. She can be reached at president@thechicagourbanleague.org.
Copyright 2008 Chicago Defender. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
About Post Author
