Foreclosure crisis disproportionately affects blacks, Latinos
Friday, June 18, 2010 at 12:25 pm
- 7 Comments
Image: Matt Hertel, iStockphoto
In a new study, the Center for Responsible Lending analyzes the demographics of the foreclosure crisis, and finds that foreclosure has disproportionately impacted black and Latino homeowners. All in all, a home owned by a black family is 76 percent more likely to go through foreclosure than a home owned by a white family. And the CRL study shows worrying evidence that the foreclosure crisis will wipe out a generation of wealth in communities of color and exacerbate the existing income and equity gap between white and non-white families.
First, some basic statistics. The CRL estimates that 2.5 million homes were foreclosed upon between 2007 and 2009 — the “vast majority” of which were owner-occupied homes with mortgages originated between 2005 and 2008. Once the foreclosure crisis is complete, as many as 10 million homes will go through the foreclosure process, which has cut across all demographic and income groups, from trailers to McMansions, from homes with subprime loans to homes with vanilla mortgages.
But the crisis has hit communities of color particularly hard — even adjusting for income. About 8 percent of black or Latino homeowners who took out a mortgage or refinanced between 2005 and 2008 lost their homes between 2007 and 2009, compared with 4.5 percent of white homeowners. All in all, 17 percent of Latino homeowners, 11 percent of black homeowners and 7 percent of white homeowners have lost their home to foreclosure since 2007 or are at imminent risk.
And, the CRL shows, “Racial and ethnic disparities in these estimated foreclosure rates hold even after controlling for differences in income patterns between demographic groups.” In fact, the skew is worse for high-income black and Latino homeowners than for low-income black and Latino homeowners.
From the report:
[The costs of foreclosure] are extensive, multifaceted and long-term, extending far beyond individual families to their neighbors, communities, cities and states. As the foreclosure crisis threatens the financial stability and mobility of families across the country, it will be particularly devastating to African-American and Latino families, who already lag their white counterparts in terms of income, wealth and educational attainment. Furthermore, the indirect losses in wealth that result from foreclosures as a result of depreciation to nearby properties will disproportionately impact communities of color. We estimate that, between 2009 and 2012, $193 and $180 billion, respectively, will have been drained from African-American and Latino communities in these indirect “spillover” losses alone.
Essentially, the foreclosure crisis could ultimately end up exacerbating the income and equity gap between white and non-white persons in the United States:
Even before the foreclosure crisis, our nation evidenced wide socioeconomic disparities. Home-ownership rates are much lower for African Americans and Latinos and, while homeownership rates have dropped for all populations since the beginning of the foreclosure crisis (down to 45.6 percent for African Americans, 48.5 percent for Latinos and 74.5 percent for non-Hispanic whites), these declines represent greater percentage changes for communities of color. In 2007, the median non-Hispanic white family reported $171,200 in net worth versus only $28,300 for non-white and Hispanic families and there are large gaps in educational attainment, with 46.8 percent and 33.1 percent of African-American and Latino adults having at least some college, compared to 59.3 percent for non-Hispanic whites. Communities of color also commonly experience higher crime and lower tax bases than predominately white neighborhoods. If foreclosures disproportionately impact communities of color, these economic and social disparities stand to grow worse.
7 Comments
Comment posted June 18, 2010 @ 1:20 pm
I summarized as much when I did a search on a real estate site for foreclosed properties a few months back. The resulting map made an amazing swath through traditionally “minority” neighborhoods and virtually unscathed in the more traditionally white suburban areas. The “PC” crapola is just a bandaid. There are still plenty of improprieties in society based on race whether people are comfortable admitting as much or not.
Comment posted June 18, 2010 @ 2:30 pm
This makes sense. As a mortgage professional, we watched for years as the government and wall street came up with more and more ways in which unqualified buyers could eventually buy homes. The result was a disproportionate amount of sub-prime lending to minorities. It only makes sense that they would in turn have higher foreclosure percentages as we made more loans to unqualified minorities then we did unqualified white people. The community re-investment act required banks to make sure a certain percentage of minorities were included in their numbers for new home loans, regardless of their qualifications. To make this happen, we lowered the standards dramatically and creative financing like pay-option arms were invented to make sure the percentages of minorities were included in the loans being made. Most of the foreclosures today, white or minority, are due to the fact that those borrowers never really qualified for the loan in the first place.
Pingback posted June 18, 2010 @ 2:36 pm
[...] Foreclosure crisis disproportionately affects blacks, Latinos … [...]
Comment posted June 19, 2010 @ 11:22 am
Dion, I think it is pretty well understood that the Community Reinvestment Act did not cause the mortgage crisis.
As I understand it, the Act does not set out racial quotas. The goal was to increase credit availability in traditionally underserved neighborhoods. Statistics on compliance are gathered by neighborhood, not by the borrower’s race. Lending in underserved neighborhoods is one factor considered when a bank applies for authority to open a new branch, or to merge with another bank.
The Act does not require any loosening of credit standards; in fact, loans are supposed to be consistent with good lending policies. The “creative” financing you mention was largely the invention of institutions not subject to the Act (the Act applies only to FDIC insured banks).
Comment posted June 20, 2010 @ 9:17 am
Randy, you’re either terminally naive or …. something else.
Comment posted June 22, 2010 @ 9:59 am
Sorry for being something else, Dennis, but you might show me where the Community Reinvestment Act requires racial quotas for lenders.
If you worked for a company that did that, it was their choice. Their choice may also have been a violation of the Fair Housing Act, but that’s another matter.
Comment posted November 14, 2010 @ 11:17 pm
I am a Realtor. Good grief, I saw over and over again Latino agents talk their clients into homes they couldn’t afford, with mortgages written in English that they couldn’t understand, and sent to Loan Officers (also Latino) that did nothing but take advantage. But many of them knew exactly what they were doing. Now those same agents are making money on the back end by listing them as short sales or foreclosures for these same people. They are also advising them how to stay in the homes during the redemption period for free, not care for them…..and in the end run down other wise good neighborhoods. So don’t blame it on us white folks taking advantage of those poor folks – in the majority of cases their own people that they trusted did it to them, and their clients knew it too. We were the fools for giving out what turned into free welfare for them. I often wonder what those agents are going to do when this is all over….probably retire on all the money they made off of all of them. But then, should we actually feel sorry for the illegals that lived in them, ran them down, refinanced them to buy their toys and drugs, and in the end got over a year in most cases of free living? If you spent a day with me touring these filthy dumps with the weeds up to the windows, rats running around and junk cars in the yards……in what was once a nice house you tree hugging liberals might change your tune. They got into them for nothing, and that is how they treated them – as if they were nothing. Adios.
RSS feed for comments on this post.
Sorry, the comment form is closed at this time.
