June 19, 2010
The continuing foreclosure catastrophe has slashed hundreds of billions of dollars in wealth from communities of color.
According to a new research report by the Center for Responsible Lending (CRL), an estimated 17 percent of Latino homeowners and 11 percent of black homeowners have already lost their homes to foreclosure or are at imminent risk. The wealth drain is the result of direct losses from foreclosures and also the decline in neighboring property values each foreclosure brings.
The report -- "Foreclosures by Race and Ethnicity: The Demographics of a Crisis," -- shows that foreclosures will continue to climb and losses will continue to mount.
From 2009 to 2012, those living near a foreclosed property in black and Latino communities will have seen their home values drop by more than $350 billion -- possibly exceeding the damage the Gulf States suffered from Hurricane Katrina. And high levels of unemployment that were caused by what CRL sees as "reckless lending" and the collapse of the housing and financial markets continue to exacerbate the foreclosure crisis.
"Whether we're talking about oil spills or housing catastrophes, it's clear that America needs to invest in prevention, clean-up and recovery," said CRL President, Mike Calhoun. "As Congress finishes financial reform legislation, the rules on home lending need to get stronger, not weaker. We need to make sure a foreclosure crisis of this type never happens again, and, though so many homes have been lost, it's not too late to prevent more damage."
The percentage of homes in some stage of foreclosure in the United States is the highest on record and five times the norm, but little study has been done to quantify this trend. The CRL report provides a detailed estimate of how many foreclosures have been completed since 2007, how many more homes are on the brink of being lost, and how all of this has disproportionately damaged black and Latino communities.
No single set of numbers exists to tell this story. Instead, CRL used several databases to compute reasonable, even conservative, estimates that together add up to a grim picture: "The United States has tolerated a dysfunctional lending system that has disproportionately eroded the wealth of communities of color and set them even further behind other groups on the economic ladder," according to CRL.
Among the report's findings:
• An estimated 2.5 million foreclosures were completed from 2007-2009 and an estimated 5.7 additional ones are imminent. (Independent estimates have suggested that up to 13 million homes will be lost through 2014.)
• On completed foreclosures, most on mortgages made between 2005 and 2008, CRL estimates that 56 percent involved a white family. But black and Hispanic families have received a disproportionate share, even when accounting for income: Nearly 8 percent of both groups have already lost a home, compared with 4.5 percent of white borrowers.
• The great majority of homes lost were owner occupied, as are those at imminent risk of being lost.
"The findings in this report describe the devastating impact that the casino culture of Wall Street and the mortgage industry is having on communities of color," said Wade Henderson, President and CEO of The Leadership Conference on Civil and Human Rights. "Instead of owning a piece of the American dream, these hardworking families have borne the brunt of an anything-goes regulatory system that has turned a blind eye toward predatory lending and the needs of vulnerable consumers, who may never recover the wealth they have lost."
Janet Murguia, President and CEO of National Council of La Raza (NCLR), says that with the right tools, every family in America can share in the American Dream. "Knowing this makes these recent findings very disturbing. Latino homeownership will retract by 17 percent by the time we feel the full effects of the fallout from the credit crisis. That's more than one million Hispanic households, an outstanding figure and higher than other groups. This crisis is moving our community in the wrong direction and it's unacceptable."
"We need Congress to hurry up and pass an independent Consumer Financial Protection Agency," says Shana Smith, President and CEO of the National Fair Housing Alliance. "We also need servicers to do whatever is necessary to stop this hemorrhaging now. Enough is enough."
