Crisis Hitting Minorities Much Harder Than Whites
The days when minority borrowers worried about being disproportionately targeted by predatory lenders are now replaced by challenges African-American and Latino homeowners face because of the foreclosure crisis.
It is no surprise that a new report from the Center for Responsible Lending finds foreclosure and negative equity-related losses among minorities have been disproportionately higher compared to white homeowners, and will further increase going forward.
The "Foreclosures by Ethnicity: The Demographics of a Crisis" report shows that nearly 8% of African-American and Latino homeowners have already lost a home compared to 4.5% of white borrowers.
The concern among community leaders, like president and CEO of the Leadership Conference on Civil and Human Rights, Wade Henderson, is that predatory lending practices turned many minority borrowers into "vulnerable customers who may never recover the wealth they lost," demonstrating why "mortgage servicers must act swiftly to help more families keep their homes."
Lower wealth and income levels have historically been an obstacle to higher homeownership levels among minorities and the main reason why these borrowers often stretched their finances thinner to achieve the so-called American dream.
Even when accounting for the income level, nearly 8% of both African-American and Latino borrowers have already lost a home compared to 4.5% of white families.
While foreclosures have hit only 4.5% of white households they also represent about 56% of all completed foreclosures on mortgages made between 2005 and 2008.
The great majority of homes lost to foreclosure were owner-occupied and so are the homes at imminent risk of foreclosure. So while minority borrowers represent less than half, or 44%, of all foreclosures, the negative effect on minority neighborhoods has been more evident.
An estimated 17% Latino and 11% of African-American homeowners either have lost their home to foreclosure or are "at imminent risk" mainly due to economic hardship. What makes their situation worse is the fact that combined, foreclosures and home equity losses are associated with home value declines in neighborhoods with high numbers of minority households.
Overall the actual numbers of families affected by the crisis is quite high. For example, the 17% retract in Latino homeownership represents over one million households according to the president and CEO of the National Council of La Raza, Janet Murguia.
The 2009 to 2012 forecast for those living near a foreclosed property in African-American and Latino communities is not promising either.
The report states that these homeowners "will have seen their home values drop" by over $350 billion and "possibly exceeding" damages suffered by the Gulf states during Hurricane Katrina.
Another key finding is that independent estimates show up to 13 million homes will be lost to foreclosure through 2014 in addition to an estimated 2.5 million completed from 2007 and 2009.
Michael Calhoun, president of CRL, a nonprofit dedicated to providing solutions that help generate and sustain equal opportunity homeownership, argues that the country is in dire need for "prevention, clean-up and recovery" investments supported by financial reform legislation that can help improve housing lending. "It's not too late to prevent more damage."
Another important finding is that an estimated 2.5 million foreclosures were completed from 2007 to 2009 and an estimated 5.7 additional ones "are imminent."
Other independent estimates have suggested up to 13 million homes will be lost through 2014.
These numbers, however, come from different sources.
The report states findings are "conservative" results based on data from several national databases "since no single set of numbers exists to tell the story."
And specific data insufficiency is just another challenge when trying to understand, explain the whereabouts and assist minority homeowners during this crisis.