Subprime crisis takes toll on Milwaukee households

A new study by the Employment and Training Institute (ETI) at the University of Wisconsin-Milwaukee indicates that more Milwaukee County households are stretching the limits of what they can afford for housing.

For many of those people, high-interest mortgages and other escalating housing costs, such as taxes, utilities and mortgage values, are to blame, according to the study.

The percentage of highly leveraged households with mortgage payments amounting to half of their income or more nearly doubled in the City of Milwaukee, from 10 percent in 2000 to 19 percent in 2006, according to the study.

In one year alone – 2005 to 2006 – high-interest rate mortgages rose 35 percent in the county.

The standard set by the U.S. Department of Housing and Urban Development (HUD) for affordable housing is that no more than 30 percent of household income should be spent on housing-related costs. Yet, homeowners in the City of Milwaukee spending less than 30 percent of their income on housing dropped from 73 percent of those with a mortgage in 2000 to 57 percent in 2006, according to the study.

The report, supported by Legal Action of Wisconsin, used recently released American Community Survey census data and Home Mortgage Disclosure Act data to assess the impact of the national housing crisis on low-income homeowners and renters in Milwaukee County.

Increases in housing costs have affected both homeowners with mortgages, as well as renters. Nearly a third (31 percent) of renting households in the city of Milwaukee reported spending at least half of their income on housing in 2006, up from 21 percent in 2000.

Among the Midwest’s 10 largest cities, Milwaukee ranked second for the percentage of its renters spending at least half their income on housing. Detroit ranked first.

The report found disparities in race and location. African Americans were much more likely to get high-cost subprime loans than whites, and two times more likely to get refinancing loans. And homeowners in the poorest areas were the mostly likely to have high-cost mortgages. The number and dollar amounts of mortgage borrowing activity in Milwaukee’s poorest ZIP code, 53206, were at all-time highs, with 75 percent of the loans either subprime or high-interest rate, up from 65 percent just two years ago.

For the full report and other information go to: http://www.uwm.edu/Dept/ETI/2007/Housing.htm.

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