At 78 years old, Dorothy Flowers has managed to keep up with her payments on the three-bedroom home she owns in West Oakland. But it has been a struggle -- her house now has more debt attached to it than it is worth.
She bought her home on Terrace Street for $17,500 in 1975 when she had three dependent children in school. Back then, her mortgage was $150 a month. Today, 38 years later, she owes three times as much as the original purchase price, partly due to home equity loans she took out to improve the house and help family members in crisis.
Ms. Flowers currently owes $61,000 on the two-story brick home that the county values at $34,600, and her mortgage payments have soared to $836.54 a month. She pays that out of the $2,200 a month she collects in Social Security benefits and a pension she receives from 25 years working at the former State Office Building, Downtown, as a clerk in the Department of General Services.
"The payments are too high," she said.
Her mortgage company -- Salt Lake City, Utah-based Select Portfolio Servicing Inc. -- was charging interest of 12.5 percent on a $67,500 cash-out refinance in April 2000.
About three years ago, community activists with the Philadelphia-based group Action United were able to help get her mortgage interest rate reduced to 9.1 percent.
It was a symbolic victory, but not enough to make a meaningful difference in her payments.
Ms. Flowers is one of an estimated 9,000 low-income homeowners in the city of Pittsburgh who are barely scraping by, paying monthly mortgages on homes worth less than they owe, according to a joint analysis by three national organizations that formed a coalition to address the foreclosure crisis -- Alliance for a Just Society, Home Defenders League and New Bottom Line -- which found in 2012 that Pittsburgh homeowners lost more than $171 million in wealth due to the foreclosure crisis.
Their report, "Wasted Wealth: How the Wall Street Crash Continues to Stall Economic Recovery and Deepen Racial Inequality in America," examines the ongoing impact of the foreclosure crisis on the country and in particular on people of color who have either been foreclosed on or are underwater -- owing more than their homes are worth -- on their mortgages.
On average, communities in Pittsburgh that are either majority communities of color or have an above average percentage of people of color saw six or seven foreclosures per 1,000 households in 2012. Predominantly white communities in Pittsburgh, on the other hand, saw five foreclosures per 1,000 households.
Three years after the end of the Great Recession, the historic housing crisis continued to destroy wealth across the country on a grand scale in 2012, with $192.6 billion in wealth lost due to the foreclosures. The most devastating impacts were in majority communities of color and racially diverse communities where homeowners received a disproportionate share of subprime mortgages.
From 2005 to 2009, the study's authors found the median net worth for whites fell 16 percent to $113,149. Median net worth fell by 66 percent for Latinos to $18,359; and 53 percent for blacks, whose median net worth dropped to $12,124.
Prior to the Great Recession, 35 percent of subprime loans were issued to borrowers who qualified for prime loans, and disproportionately so for black and Latino borrowers. After controlling for credit scores, income and other factors, blacks were 80 percent and Latinos 70 percent more likely than white borrowers to receive subprime loans.
"In some cases, people with decent credit got funneled into loans that they should not have had," said Maryellen Deckard, an organizer with Action United. "In all the cases I have seen when a person has decent credit and they are white, the interest rate is from 9 percent to 14 percent.
"If they are black, the interest rate is from 12 percent to 21 percent. I have seen 21 percent on a mortgage. Somebody ... should go to jail for charging a 21 percent mortgage, if you ask me."
The market rate for mortgages and refinances are currently at all-time lows, with 30-year home loans ranging between 3 percent and 4 percent.
The Obama administration has introduced the Making Home Affordable program to help troubled homeowners reduce monthly payments by refinancing or modifying their current loans. The refinance and mortgage modification program was meant to benefit an estimated 5 million to 7 million homeowners who cannot refinance for lower rates and payments because their homes have fallen in value. But the program has been criticized by housing activists who say it has fallen short of helping the people it was created to assist.
Ms. Deckard said most of the low-income homeowners she works with are trying in good faith to pay underwater mortgages. They are often faced with one critical situation after another, such as an illness or job loss, or some other pressing issue that causes them to fall behind on payments.
"They try to catch up, but the lender keeps charging fees," Ms. Deckard said. "So what happens is they make a mortgage payment and the whole mortgage payment goes to the fees and then that mortgage payment is late because it wasn't paid.
"And it keeps rolling. By the time I get them, they are in foreclosure even though they have been paying every single month. I see this all the time."
Another aging African-American homeowner, VallieRee Still, 76, has lived in her home on Graham Street in East Liberty for 37 years. She originally paid $14,500 for the four-bedroom wood frame house in 1976.
After refinancing her mortgage seven or eight times over the years, she now owes $52,000 on the house valued at $41,400 by the county. She could not come close to affording the $800 monthly bill for mortgage, insurance and taxes if not for her daughter and grandchildren.
Ms. Still, a retired daycare worker, receives $700 a month in Social Security benefits. However, her 35-year-old daughter and her daughter's children, ages 14 and 13, also receive Social Security disability checks, which are used to pay the mortgage and household expenses.
"When I bought this house, it was in bad condition and I took out a loan to bring it up to date," Ms. Still said, adding that she remodeled her kitchen twice, remodeled her bathroom twice and completely redid the third floor over the years.
With an interest rate of 9.5 percent, Ms. Still has little chance of ever owning her home free and clear. "It seems like you can never get the balance down," she said. "You pay $5,000 in interest and only $300 or $400 goes for principal."
In Ms. Flowers' case, she took out a $30,000 loan against her house in 1978, three years after she bought it. She used the money to redo her kitchen, add a patio to the back, finish the basement, replace windows, fix her roof and pay off some other bills.
Then, in 2000, Ms. Flowers found herself in another financial bind when her adult daughter was diagnosed with cancer and had to move in along with a 7-year-old son. "From December of 1999 until May 2000, I had her here in my dining room, taking care of her in a hospital bed, maintaining and keeping her with no help."
With her own bills to pay and other expenses related to caring for her daughter and grandson, Ms. Flowers pulled cash out of her home and assumed a new 30-year mortgage loan of $67,500 at 12.5 percent. According to the loan documents, her finance charges alone would amount to $192,816.20 by the end of the 30-year payments.
The authors of "Wasted Wealth" want the federal government to focus on a strategy of reducing the mortgage principal for homeowners with underwater mortgages.
"Dorothy [Flowers] has a little better situation in that the bank did give her a modification a few years ago," Ms. Deckard said. "But that interest is still way too high in today's market."
Tim Grant: email@example.com or 412-263-1591. First Published May 29, 2013 4:00 AM