Minority, Metro Area Delinquencies Seem Harder to Read
A few years back when it came to minority housing especially in the largest metropolitan areas the risk of stretching lending too thin was often overshadowed by the benefits of higher rates of homeownership. Today concerns about the uncertain future of millions of seriously delinquent loans and a general confusion about the real number of unavoidable foreclosures clogging the housing delinquency pipelines has overshadowed another story: That of how minority homeowners, even renters in multifamily buildings, have been affected by the crisis.
According to Phil Baldwin, president and CEO of CredAbility, a credit counseling and financial education nonprofit based in Atlanta, over one million Latinos had already lost their homes or were at risk of foreclosure at yearend 2011. “It is our responsibility to ensure we reach this community in need,” he stated in a company release, because “Latinos have been more impacted by the crisis than any other minority group.”
Lending to minorities has been at the center of the national discussion about the subprime market risks and predatory lending practices. A few years ago Federal Reserve chairman Ben Bernanke challenged charges based on the misperception that the Community Reinvestment Act of 1977 forced banks to approve affordable, federally sponsored mortgages for poor, unqualified buyers, who eventually defaulted on their loans leading to the foreclosure crisis that collapsed the housing market.
Following such criticism the Financial Crisis Inquiry Commission established by Congress researched the issue and reported it was not “a significant factor in subprime lending or the crisis.” The commission found the GSE’s CRA related affordable housing goals contributed only marginally to the purchase of risky mortgages by Fannie and Freddie.
The issue of how minorities are affected by the crisis has received far less attention.
Research data on how the foreclosure crisis impacted communities of color reported at yearend 2011 by the National Community Reinvestment Coalition, show that non-Hispanic white borrowers shared 65.9% of all originations between 2005-2008 and 56.1% of foreclosures completed between 2007-2009, which represents a 4.5% foreclosure rate, compared to 7.9% for African-Americans, 7.7% for Hispanic/Latinos, 4.6% for Asians, 5.9% for American Indians and 6.3% for Hawaiian/Pacific Islanders.
Findings from the NCRC report, its authors note, contrast with a HAMP survey with foreclosure mitigation counselors conducted by NCRC in 2010 suggested that white HAMP-eligible homeowners were almost 50% more likely to receive a modification compared to their African-American peers.
The report’s findings about the HAMP performance by race and ethnicity based on 2011 U.S. Treasury data showed 31.4% of loan modification starts after Dec. 1, 2009 went to whites, 11.5% to African-Americans, 16.4% to Hispanics and 3% to Asians. Permanent modifications were split at 32.9% to whites, 12.1% to African-Americans, 17.7% to Hispanics and 3.1% to Asians.
While these racial and ethnic breakdowns are informative, the report notes, “It is difficult to put these proportions into a broader perspective.”
CredAbility’s director of Hispanic external affairs said the focus in 2012 is on the long-term goals of educating the youth and cultivating savvy Hispanic customers alongside giving help to those who are facing a financial crisis.
In November 2011 the National Association of Real Estate Brokers hosted the State of Housing in Black America Issues Forum in Atlanta to discuss the effects of the mortgage crisis in minority communities and find solutions. NAREB quoted research by Atlanta Regional Housing showing that 80% of Georgia’s foreclosures filings were from Metro Atlanta, which according to RealtyTrac has the 16th highest foreclosure rate in the country. Heavily minority counties such as Gwinnett, Fulton, Dekalb, Cobb and Clayton had some of the higher concentrations, including the Atlanta Promise Neighborhood where the foreclosure rate was 40%.
As the new year begins data show there are some good news to report from the metro areas including those with large minority populations.
According to Foreclosure-Response.org, an online resource jointly maintained by the Center for Housing Policy, the Local Initiatives Support Corporation and the Urban Institute, the serious mortgage delinquency rate has been showing “a slow but steady downward trend.”
From 10.4% at its peak in December 2009 to 9.3% in June 2011, according to Foreclosure-Response.org, the number of loans in foreclosure and those delinquent 90 days or more declined primarily due to a decrease in delinquent loans from 5.5% in December 2009 to 3.7% in June 2011. The average foreclosure rate remained flat at 5.5% over the three quarters ending in June.
The catch is in the statistics themselves since despite of the abundant data available, “foreclosure trends are less clear” because they vary significantly from state to state, and MSA to MSA.
For example, in Riverside and Stockton, Calif., the foreclosure rate decreased the most, down 1.9% and 1.7%, respectively, from the peak in December 2009. In Florida, New York and Illinois metros, on the other hand, foreclosure rates increased steadily: 2.8% in Tampa, 2.3% in Chicago and 2.1% in New York between December 2009 and June 2011.
At the current pace of foreclosure sales, said Urban Institute research associate Leah Hendey, the process “could take decades to complete,” making it critical to their communities and the housing market.