Their homes are gone, their credit is shot and their rent is often more expensive than a mortgage payment.
The housing bust affected people of all races, but it hit the region's black and Latino populations hardest of all, causing minority homeownership rates to fall to their lowest level in decades, new Census 2010 data show.
About 36 percent of the region's blacks own their homes, down from 40 percent in 2000. For Latinos, the homeownership rate dropped from 49 percent to 47 percent during that time.
By contrast, the homeownership rate for whites 67 percent and Asians 62 percent rose during the last 10 years.
All races saw homeownership rates increase during the housing boom of 2001 to 2006, as home values roughly doubled. The difference is that in the subsequent bust, whites and Asians merely lost most of what they had gained. Blacks and Latinos lost all their gains and more.
That's because blacks and Latinos were far more likely to take out subprime loans during the boom. The loans, which typically featured low initial interest rates that skyrocketed after a few years, consistently led to foreclosures.
Many blacks and Latinos took those loans because it was all they could afford, and they wanted in on the housing boom at any price, several real estate experts said. Traditional, safer loans required lots of cash upfront.
Half a dozen experts interviewed, though, said lenders and mortgage brokers in some cases targeted blacks and Latinos for subprime loans, hoping to make money off higher interest rates and lending fees. As evidence, they pointed to studies showing that lenders often sold subprime loans to blacks and Latinos who qualified for cheaper traditional loans.
The consequences have been devastating. Thousands of minorities lost their most valuable possession. Dozens of homes in minority-dominated neighborhoods can be bought for the price of a car. And poor credit combined with the lagging economy have led to higher unemployment and steeper income declines among blacks and Latinos than among other groups.
The region's whites are now 85 percent more likely to own homes than blacks, and 45 percent more likely to own homes than Latinos.
"It had a tremendous impact when people had to uproot and start all over again," said Barbara Moseby, a local real estate agent who has helped scores of black families find homes. She's now selling her own home for a loss. "It really broke our trust in our government and institutions."
One of the easiest places to see these patterns is in the Deerfield/Mesa Grande neighborhood, a densely populated community of ranch homes nestled between the south Sacramento areas of Meadowview and Valley Hi.
Mesa Grande is affordable and has long had a strong homeownership rate, particularly among blacks, who make up about a quarter of the neighborhood's population.
In 2000, about 73 percent of the 550 black households in Mesa Grande owned their homes, census data show.
During the ensuing decade, though, the number of black homeowners in Mesa Grande fell by 100, or 25 percent. Including all races, more than 200 homes in the community switched from owner- to renter-occupied. Another 150 homes in the area sat vacant in 2010, triple the number from a decade prior.
Those who lost their homes mostly left Mesa Grande. Many of the landlords who subsequently scooped up property have proved unwilling or unable to help improve the community, said Barbara Falcon, who runs the local neighborhood association.
"They buy them up for dirt cheap," she said. "They fix them up just enough to pass first inspection. Then they sit back and collect rents."
On one small street, Deer Lake Drive, covering seven-tenths of a mile near Falcon's cul-de-sac, city code enforcement officials have investigated 104 cases since 2008, from graffiti to illegal dumping to abandoned junk cars. Falcon says this is the legacy of the housing bust, and views it with weary resignation.
"It's constant," she said of the struggle to maintain her community as homeownership declines. "It will go on forever."
The struggle is different, but also difficult, for those forced to leave Mesa Grande.
Kali Cuffee, a hairstylist, is one of Falcon's former neighbors a one-time homeowner who now rents.
Cuffee left the Bay Area and bought a Sacramento starter home in 2002. As her salon did well, she purchased a Mesa Grande home the next year for $215,000. "It was a beautiful four-bedroom, two bath house with a pool, spa and a landscaped front yard," she said.
The home's value rose to $390,000. She took advantage of the newfound equity, refinancing with an interest-only loan, eventually increasing her monthly mortgage payment from $692 to $2,100.
She used money from the refinance to help grow her business. But that business faltered when the recession hit, leaving her without enough cash to make her mortgage payments. Like thousands of others, Cuffee couldn't get out of the jam by selling her house, which was worth less than she owed once the housing market tanked.
The bank took the home in 2009.
Now Cuffee's separated from her husband and living with her four children in a two-bedroom, $710-a-month apartment in subsidized housing on Stockton Boulevard.
"I have faith that one day I'll be able to put my children back in a home again," she said. "I'm going to learn from my mistakes."
Lenders cleaned up on fees
While Sacramentans of all races entered into risky refinancing packages during the housing boom, it's easy to see why blacks and Latinos were particularly tempted to cash in.
At the height of the boom in 2006, census figures show, full-time black workers in the Sacramento region were earning, on average, about 77 cents for every dollar earned by whites. Latino workers were earning, on average, about 65 cents for every dollar earned by whites. Those gaps were growing each year as minority earnings failed to keep pace with inflation.
"This was our American dream African Americans were never afforded that opportunity before," said Pleshette Robertson, Cuffee's sister and a community activist, noting that blacks historically have had problems getting loans. "A lot of us owned these dilapidated homes and we wanted something new."
The same income troubles that created a desire to refinance, though, also left blacks and Latinos with few options.
Without cash for a healthy down payment, blacks and Latinos turned to the subprime lending market, which overlooked such deficiencies in exchange for higher fees and interest rates. These loans were heavily marketed to low-income residents.
"There were lenders charging six points on a deal," said Sheri Schmitz, a Wells Fargo loan officer who worked for another company during the boom. She declined to make the riskiest loans herself, she said, but, "it was a Sodom and Gomorrah time for us. From 2003 to 2007, everybody was making tons of money."
Some lenders would offer a teaser interest rate that added hundreds of dollars a month to the loan principal. "So instead of $300,000, you'd owe $360,000 in five years," said Dwayne Kirkwood, who is president of Sacramento Realtist, an organization for Realtors of color.
Preschool teacher Deborah Thompson said she felt pressured to take a subprime loan an interest-only clunker that she had no real chance of repaying when she didn't really need it in 2004. She takes responsibility for her bad decision, but her lender, she said, told her, "This is the way wealthy people do it."
"I'd gotten the loan through someone I knew, that I trusted," she said, adding that the bank recently foreclosed on her home. "I tried to get them to reduce what I owed, but it never happened."
Kirkwood said it was greed, not racism, driving loans to minorities, noting that blacks and Latinos were often selling subprime loans to other blacks and Latinos.
But others said that some lenders specifically targeted blacks and Latinos for risky loans, seeing them as easy marks.
Paul Leonard, California director of the Center for Responsible Lending, pointed to a study by his organization showing that blacks and Latinos were 30 percent more likely to get subprime loans than white borrowers with similar risk characteristics.
Leonard also cited a court case last year involving two subsidiaries of financial firm AIG. The subsidiaries agreed to pay $6.1 million to settle a claim that their brokers overcharged African Americans on thousands of loans made between July 2003 and May 2006.
Education efforts launched
In the end, 44 percent of loans sold to area blacks and 41 percent of loans sold to Latinos during 2005 were subprime. That's nearly twice the rate of subprime loans sold to all other races.
Within a few years of the origination of those loans, Oak Park, Valley Hi, Lemon Hill and other minority-dominated areas became the epicenter for local foreclosures, converting scores of owners to tenants.
Many blacks and Latinos have struggled to recover from those setbacks. In part that is because they have seen their credit rating damaged by the housing bust and their financial problems worsen in the recession.
But it's also because without a subprime loan market banks deny home loans to blacks and Latinos at a higher rate than to whites.
In 2009, lenders denied about 48 percent of loan refinancing applications from local blacks and 41 percent from local Latinos twice the denial rate among other races, federal data show.
There is a bright spot: the increasing prevalence of Federal Housing Administration loans, which offer flexible terms and low down payments. In 2009, banks sold about 530 FHA loans to local blacks and another 1,400 to Latinos.
Several community groups are working to educate minorities about FHA loans and attempting to repair the homeownership rate among blacks and Latinos.
The local branch of the National Association for the Advancement of Colored People is planning a free training program for homebuyers, teaching them mortgage loan basics. The program is an attempt to rectify the lack of real estate experience that NAACP housing chair Stephen Webb said has caused so many problems in minority communities.
"We recognize the buyer, too, is responsible," he said. "There was not enough education."
The NAACP will hold a workshop on the fundamentals of homebuying and mortgage loans on Oct. 6 at 9250 Laguna Creek Drive, Elk Grove. For more information call (916) 447-8629.