Blacks and Latinos - especially those living in major metropolitan cities - are at a higher risk of defaulting on their mortgages or foreclosing on their homes, according to a recent study.
The White Paper, authored by UCLA professor Raul Hinojosa and released by the William C. Velasquez Institute, looks at how the home ownership crisis is impacting blacks and Latinos. It focuses on major cities nationwide that have been hit hardest by rising foreclosures and unemployment, such as Los Angeles.
"The meat and potatoes of this study is we are about to face wave two of this tsunami of foreclosures," Hinojosa said. "And it's going to hit hardest among minorities - blacks and Latinos - in a perfect storm of decreasing employment, decreasing property values, as well as the resetting of high-priced mortgages."
According to the study, blacks and Latinos in the Los Angeles area were about three times more likely to hold high-priced mortgages than whites - and half of all home loans sold to blacks and Latinos were considered "high-priced."
Furthermore, blacks and Latinos in several major cities across the nation - including California - held more than double the amount of high-risk loans compared to whites from 2006 to 2007.
Experts say the reason behind the increased risk is simple: Latinos and blacks were more vulnerable to predatory lending practices during the housing boom in the early to mid-2000s.
And now it's catching up with them.
"It was too good to be true. The heyday of real estate - 2004, 2005 to 2007 - they were just giving money away," said Chris Vigil, a broker and appraiser in the Whittier area. "Anyone with a pulse could get a loan."
As a result, many blacks and Latinos striving for the American dream received home loans, but under faulty qualifications, said Antonio Gonzalez, president of the Velasquez Institute, a think tank for Latino studies.
"It wasn't the concept that was bad, it was the implementation, the profiteering," Gonzalez said.
He referred to balloon payments, adjustable interest rates, sub-prime mortgages and zero-down-payment tactics used to prey on homebuyers who weren't ready to take on mortgages.
"No one expected that millions of Americans would fail on their loan payments simultaneously," Gonzalez said. "But they did, because of these ticking time bombs in the mortgage structures."
Glendora real estate broker Marty Rodriguez said she knows of at least one such case - a woman in Pomona who managed to get a loan despite the fact she hadn't worked in 10 years. Her husband is a gardener. Now that woman, a Latina, is losing her home.
"You can see when you look at the defaults - you can see by the name - there are a lot of Latino surnames," Rodriguez said.
In the San Gabriel Valley, some of the communities hit hardest by the foreclosure crisis are La Puente, Baldwin Park and El Monte, Rodriguez said. According to the 2000 Census, all of these cities had Hispanic or Latino populations topping 72 percent.
"That community is funny in the sense that they only trust the Spanish-speaking Realtor, the Realtor from their homeland," Vigil said. "What's happened, though, is the same people they put their trust in to protect them from these bad loans (were the same people) trying to slam them into the property."
While the black population in the San Gabriel Valley is not as prevalent, more dense black communities exist in cities such as Pasadena, Monrovia and Duarte. And area business leaders said that while their numbers are significantly smaller than Latinos, blacks in the area also have been hit hard by the foreclosure crisis.
"They are having a hard time," said Sheree Curry, president of the San Gabriel Valley Black Chamber of Commerce. "It was everybody's dream to own a home, but they were put in a situation where even though they couldn't afford it, they were able to."
Of course, home ownership wasn't always that easy. For decades, owning a home was the thing of dreams, Gonzalez said, until after World War II, when the government began providing subsidized home loans, essentially creating a middle class.
Still, homeowners were predominantly white. It wasn't until the last two decades or so that blacks and Latinos became serious homebuyers, Gonzalez said. And now that staple of the American dream is fading.
"We've always lagged behind whites in home ownership," Gonzalez said. "Now most of that progress made in the last 15 years has been wiped out."
Furthermore, rising unemployment coupled with already troubled housing markets puts "homeowners of color" at even more risk, said David Mason, a Ph.D. student in the Department of Urban Planning at UCLA and a research assistant on the study.
The latest figures show the nation's jobless rate was at 10.2 percent in October - the highest since early 1983. And in Los Angeles County, the unemployment rate shot up to 12.7 percent in September.
Rodriguez said turning the tide for black and Latino homebuyers is going to take a lot of education - "educating these people to live within their means and educating them not to be taken advantage of."
But it's also going to take policy change, Gonzalez said.
Right now, foreclosure aid is not available to a lot of blacks and Latinos because they are "underwater" in loans, lacking enough income or unemployed, he said.
"It's cherry picking in the sense that it's helping people that are in bad shape, but not helping the people who are in really bad shape," Hinojosa said.
Gonzalez and Hinojosa suggested allowing bankruptcy judges to restructure loans.
"(Barack) Obama's policy needs to be revamped so it's not cherry picking and not temporary," Gonzalez said.
The banks need to help out too, Curry said.
"The banks got bailed out, but they're not making any effort to help the people," she said. "The banks are not stepping up at all and somebody should make them."