A WCVI White Paper
The Continuing Home Foreclosure Tsunami:
Disproportionate Impacts on Black and Latino Communities
By Dr. Raul Hinojosa Ojeda
This WCVI White Paper analyzes recent data from select U.S. metropolitan areas to highlight the depth and breadth of the current economic crisis and housing downturn. While particularly acute in certain urban areas, the extent of the economic decline has spanned the country and has especially impacted Blacks and Latinos both as a threat to homeownership and as a cause of unemployment. This White Paper supplements our June 2009 report “The End of the American Dream for Blacks and Latinos: How the Home Mortgage Crisis is Destroying Black and Latino Wealth, Jeopardizing America’s Future Prosperity and How to Fix It,” which is available [here] . This report makes the following key findings:
- The foreclosure crisis is highly concentrated in areas of recent high growth, such as the West and Southwest and regions that have seen steady economic decline and deindustrialization, such as the South and Midwest;
- At the peak of the recent housing expansion, black and Latino homeowners held high-cost mortgage instruments with two to nine times the frequency of whites in selected foreclosure regions and are at a proportionally greater risk of defaulting or vacating their homes;
- Nationally, blacks and Latinos have higher rates of unemployment than whites. In regions strongly effected by the foreclosure crisis, these groups have lost thousands of jobs in homebuilding and construction sectors. This aggravates an already acute risk of mortgage default and foreclosure among black and Latino homeowners.
Current policies do not adequately respond to 1) the present scale and rate of home foreclosure, as well as future estimates; 2) the concentration of blacks and Latinos in regions with excessive mortgage debt and negative equity that deters program eligibility; and 3) rising unemployment among blacks and Latinos that may make them ineligible to participate in these programs.
Moreover, home foreclosure and negative home equity have corrosive spillover effects; diminishing the values of nearby homes and perpetuating a cycle of foreclosure or owner vacancy.
Greater and immediate policy intervention is required to mitigate and reverse the crisis and return the sector to long-term health. Such policies should expand eligibility criteria to protect and expand homeownership among blacks and Latinos, including:
- Expand eligibility requirements for the Making Home Affordable program to target borrowers who are most at risk of foreclosure or who are likely to vacate their homes because of pronounced negative equity;
- Reform bankruptcy laws to enable restructuring of mortgage terms to discourage default or flight;
- Underwrite Fannie Mae and Freddie Mac mortgages to allow private sector refinancing at 4.5 percent interest rate;
- Extend and expand the current Federal Tax Credit for first time homebuyers. This policy will expire in the near-term and requires prompt Congressional action. The current $8,000, while helpful in non-coastal regions, should be increased to have greater impact in more expensive markets like California and the northeast.
To Download the Entire Report, click on the links below (PDF):