Losing a home is devastating no matter what your background, but proportionally Black and Latino communities have suffered more in the foreclosure crisis, according to a new study from the William C. Velasquez Institute, WCVI, authored by Raul Hinojosa – Ojeda, PhD of UCLA.
One major cause is that 55% of Blacks and 46% of Latinos were burdened with sub prime mortgages although most of them qualified for standard home loans, according to the institute’s analysis of data from RealtyTrac the foreclosure tracking site.
“The study finds that Blacks and Latinos were two to nine more likely to have high cost mortgages than whites,” stated WCVI President Antonio Gonzalez. “These predatory banking practices have directly led to the loss of homes, wealth, and prosperity in disproportionately more Latino and Black neighborhoods and could set back those communities for generations.”
The first wave of foreclosures was concentrated on sub prime loans. The next has been due to increased unemployment. Here Blacks and Latinos took another hit. Although the national unemployment rate is now in double digits at 10.2%, in the Latino community it’s 13.1%; for blacks, it’s 15.7%, higher in states with greater unemployment. For Latinos, the greatest proportion of home ownership is in the West and Midwest; for blacks the Midwest and South. These areas are all greater risk for foreclosures than the national average. Since many minorities work in home construction, and now have less work, the crisis feeds on itself. In just two metropolitan areas, Las Vegas and Bakersfield, Latinos currently are at risk of losing 15,000 homes. For Blacks the hardest hit metro areas are Chicago and Miami.
Between 2005 and 2008, 7.6 million homes had been foreclosed in the US. The Center for Responsible Lending projects 2.4 million foreclosures for 2009, increasing next year.
The WCVI study makes the following recommendations:
- Broaden eligibility requirements for the Making Home Affordable Program.
- Underwrite Fannie Mae and Freddie Mac mortgages to permit private sector mortgage refinancing at a 4.5%
- Reform laws to give bankruptcy judges the power to rewrite mortgage terms ( ForeclosureIQ.com because approval of the process would undermine all consumer lending, increasing interest for all loans across the board.)
One suggestion, the extension of the home buyer tax credit, has already been implemented.
The report describes the crisis in these minority communities as a tsunami, not only wiping out individual home equity, but lowering home values in entire neighborhoods an effect that will only lead to increased owner vacancy, causing others to stop paying their home loans, shoving communities off a precipice of decay.
“If nothing is done then the foreclosures will continue disproportionately hitting blacks and Latinos,” said Dr. Hinojosa-Ojeda. “Not only are you wiping out this generation of black and Latino families, but those neighborhoods go into serious decline.”