Media Advisory
January 12, 2006
Contact: Becky Fleischauer, 202-220-2360 or 202-270-9350; bfleischauer@nw.org
NeighborWorks® Honors King’s Legacy of Empowerment with Call for Increased Homeownership and Financial Education
(Washington, D.C.) – In honoring Martin Luther King Jr.’s legacy of empowerment, NeighborWorks America CEO Ken Wade called for increased homeownership and financial education to ensure that homeownership is built on a strong foundation. “As predatory lending in our communities increases, and more families find themselves in risky mortgages, homeownership and financial education becomes imperative for ensuring that families keep their homes and build equity,” Wade said.
According to the Fannie Mae Foundation, in 2005 the rate of homeownership among blacks and Latinos nationally grew at a faster rate than that of whites. “As homeownership educators and counselors, we greet this benchmark with a healthy dose of caution,” Wade said. “Without access to quality information and guidance, many consumers miss opportunities to get the most of their investment or worse, fall into mortgage traps that eventually lead to foreclosure and financial ruin. We’ve found that many consumers assume that banks are required to give you the best rate available. This isn’t true.”
The kind of loan a consumer gets can make a big difference in what they end up paying for their home. For example, a house listed for $175,000, with a 5 percent down payment, would cost a borrower with a good credit rating about $350,000 over the life of a 30-year loan at 5.5 percent. A borrower with a subprime loan at 8.5 percent would pay nearly a half-million dollars over the same period.
Through education and counseling NeighborWorks helps consumers steer clear of risky and costly loans. Many consumers who assumed they could only qualify for risky subprime rate loans are learning to manage their money more wisely and choose loans more carefully. When comparing total lending activity, the NeighborWorks network serves four times as many minorities as conventional lenders and twice as many women and almost three times the number of low-income residents.
For most families homeownership is an asset that builds more equity than any other investment, especially among African Americans. Blacks are more than twice as likely as whites to use their home equity to increase future wealth through investment in business or education. “In short, homeownership creates traction for accumulating future wealth,” Wade said. “And as income and education gaps continue to shrink, wealth inequality has become the most fundamental civil rights issue of our time.”
Wade has committed to tripling NeighborWorks national capacity to provide more consumers with homeownership education and counseling. Those receiving high-quality homeownership education and counseling have half the default risk as those who did not. And borrowers who complete education and training courses cut delinquent payments by 30 percent. Despite its proven advantages, it is estimated that only 15 percent of current first-time homebuyers receive adequate counseling and education.
“Homeownership plays a vital role in helping families move into the economic mainstream and stay there. As we honor the enormous contributions of Dr. King, let us realize the powerful wealth-building opportunity homeownership represents,” Wade said.
About NeighborWorks America
NeighborWorks America provides financial support, technical assistance and training for communities across the nation, including the NeighborWorks network — a nationwide network of more than 240 community development organizations working in more than 4,000 urban, suburban and rural communities across America. These organizations engage in revitalization strategies that strengthen communities and transform lives. In the last five years alone, NeighborWorks organizations have generated more than $8.5 billion in reinvestment and helped more than 500,000 families of modest means purchase or improve their homes or secure safe, decent rental or mutual housing.
