Black MBA - Fall 2008 - (Page 36)

FEATURE Is the Middle Class Disappearing? Modern Times For the Middle Class, the American Dream of Home Ownership is at its Highest Price Ever By Denise Stewart A LARGE, DARK BRICK ranch house sits on a corner lot in the Winewood subdivision in Birmingham, Ala. Last year, the lawn was manicured and flowers grew at the entrance of the spacious courtyard. This summer, the grass is high and the only lights come from reflections of passing cars. There’s a white “NOTICE” sign on the door. Neighbors say they don’t know what happened to the family who lived there. One day, they were gone. As the mortgage crisis stiffens its grip on America, this scene is being played out in millions of middle-class communities like Winewood with $150,000 to $300,000 homes, and in other places where the cost of homes is much higher. In the first quarter of 2008, one in every 194 U.S. households received a foreclosure notice, according to the U.S. Foreclosure Market Report. Default notices, auction sale announcements and bank repossessions were reported on 649,917 properties during 2008’s first three months, the report says. That’s a 23 percent increase over the previous quarter and a 112 percent increase over the first quarter of 2007. Darryl Ward, a regional manager with Wells Fargo Home Mortgage, calls it an “epidemic.” “A lot of the people who were trapped had either 2/28 mortgages or 3/27 mortgages,” he says. A 2/28 means that for the first two years of the mortgage, the rate was fixed and then it moved to variable rates for the remaining 28 months, he explains. In a 3/27, the concept is similar but the terms are different. Problems were compounded by the large number of homebuyers who got “liars’ mortgages,” Ward says. This means that they stated income to a mortgage company or bank but did not provide documentation. In many cases, the credit score threshold was lowered and the purchaser also was not required to pay what had been a standard 5 percent down payment. For those who are about to lose their homes to foreclosure, the government, mostly through the Federal Housing Administration (FHA), has developed some tools to help. There are also some common sense approaches that homeowners can take to help migrate through the mortgage crisis, says Harry Chambers, an NBMBAA member and financial consultant based in Birmingham. “You must have a strategy in addressing the problem,” Chambers says. “Take a look at where you are and come up with a game plan. Some people who are very frivolous with their finances think they can wait to the last minute to do something about it. I advise people to take responsibility for what they need to be doing and work toward accumulating wealth so they can pass it on.” If homeowners have adjustable rate mortgages with subprime rates, it’s time to refinance now before 36 BlackMBA • Fall 2008 • www.nbmbaa.org http://www.nbmbaa.org

Table of Contents Feed for the Digital Edition of Black MBA - Fall 2008

Black MBA - Fall 2008 Contents Online From the Chairman From the President & CEO Up Front Who is Middle Class? Life and Times of the Middle Class Modern Times CEO to CEO: Why Didn’t I Think of That? Pass it Forward 30 Years of Conference NBMBAA Board of Directors Honorary Co-Chairs Conference History Speaker Showcase Industry Theatre NBMBAA Case Competition® Scholarship Winners NBMBAA Chapter Presidents Conference 2009: New Orleans The New Face of Recruitment Part-Time is the Right Time Across the Pond On Campus Board Bound MBAs for the USA Market Reality: Good Tapping Company Resources On the Move Employer Profiles Leading Bias-Free Mentoring Matters Faith in Corporate Circles Mideast Region Steps Up its Game Collegiate Chapters All in the Family How to… International Markets Are You Happy? Survive and Thrive Striking a Balance Advertiser Index In Focus

Black MBA - Fall 2008

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