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Foreclosures by Race & Ethnicity: The Demographics of a Crisis

By
Real Estate Agent with 1st Action Real Estate

The headline caught my eye. "California Foreclosure Rate Highest For Latinos"

The article stated 'Loans taken out by Latinos in California have been more likely to end in foreclosure than most other groups' according to a study released by the non-profit Center for Responsible Lending. It went on to say that while Latinos comprise less than a third of the state's borrowers, they made up almost half of the states foreclosures between October 2006 and November 2009. It further pointed out that black borrowers are also disproportionately represented, accounting for less than 6% of loan origination but nearly 8% of foreclosures.  Grim statistics to be sure.

I read on hoping the article would delve into some of the reasons for this disparity. I wrote an article back in 2004 quoting a prominent economist who forecast that Blacks and Hispanics would pay a disproportionate penalty in the housing crisis as a result of the Community Reinvestment Act. I can't find that old article and I disremember who I quoted but I recall clearly the fact that as a result of targeted efforts through the CRA, Hispanics would be hardest hit by the collapse. 

Hispanics were first victimized by the edicts of Barney Frank and his fellow legislators who encouraged banks to lend heavily to inner-city citizens in an effort to spread the joys of homeownership to all. Did I say 'encouraged banks'? Nay, banks were not just encouraged, banks were disparaged and penalized if they didn't fulfill arbitrary quotas of inner city loans, most often admittedly to unqualified and ill-prepared borrowers. It was set-up to fail.

This was not referenced in the article.

These same folks were further victimized by rampant lending and mortgage fraud. Over the years that I have been following fraud, so-called 'affinity fraud', where one ethnicity preys heavily on their own members, has been especially prevalent in the Hispanic community. 

This was not referenced in the article.

But another article from HispanicBusiness.com based on the same series of reports included the statement: 

"NCLR has sounded the alarm for the last two years about the devastating impact foreclosures have had on communities of color, but this report reveals a shocking level of concentration among Latino homeowners in California," said Janet Murguia, President and CEO of the National Council of La Raza. "Dishonest brokers peddled their high-cost loans, steered our families into risky products designed to fail and now Latinos and all of California are paying the price."

Well, you should have been sounding the alarm a lot longer than 2 years ago. The horses had long since left the barn by 2008. Where were you in defense of your compatriots back when these loans were being written? When dishwashers earning $7.50/hr were buying $600,000 homes? When Latinos were being indicated daily for predatory lending to other Latinos?  When Barney Frank, Chris Dodd and California's hero of the underdog, Maxine Waters, were singing the praises of expending enforced homeownership through the CRA?

What was called for in the article - you may have already guessed - MORE MONEY for Spanish language loan counselors. Yeah, that'll solve the problem. And if the new crop of loan counselors turn out to be like the last crop of 'loan counselors' and 'loan modification consultants' and 'short sale experts' and 'mortgage lenders',  we'll be unleashing a whole new blight on this class of victims. Yet nobody wants to find out why this happened, it's sufficient to simply throw more money at the problem that was created. 

And never mind that the people in charge when the problems were created are still in charge of the clean-up today in Washington. 

There were some other recommendations from the panel:

  1. Require servicers to complete the review of loan modification applications before beginning the foreclosure process. This is the central feature of California bill SB 1275 which will be considered by the full California Assembly this week before being sent to the governor. --  (worthless lip service that accomplishes nothing. Lenders simply go through the process before denying the loan - more paperwork, longer delays, same results)
  2. Incorporate principal reduction into loan modification programs, especially where housing prices have contributed to a lack of affordability. --  (Yeah, the loan mod programs have been so successful, lets add another level of complexity to them plus another opportunity for banks to lose even more money)
  3. Lift the ban on judicial modification of principal residence mortgages by bankruptcy judges. --  (That's right, let judges call the shots for banks now. That'll help stabilize the lending market)
  4. Expand funding and capacity of housing counseling agencies and legal aid providers. (Throw more money at the problem without understanding what created the problem to begin with.)

But the one I love best...
    5.  Resist efforts to roll back policies designed to promote homeownership to disadvantaged groups.
(In other words, don't do anything about the CRA and other policies that created the problems to begin with. Keep lending to unqualified people but just throw more money at the problems that develop as a result.)

(the stuff in red is obviously just my opinion. I could be wrong)

Well, it's an interesting problem and one that will not soon go away for Latinos or anybody else. For what it's worth, you can read the whole report here - there's even a Powerpoint. That's always good. 

Foreclosures by Race & Ethnicity: The Demographics of a Crisis

Comments (3)

Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

Gene,

There are lots of elected officials that should be arrested.

Aug 20, 2010 08:43 AM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

Can we START with Barney Frank?  Please, please, please!!!

Aug 20, 2010 12:27 PM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Common sense seems to be kept out of DC by a protective bubble... 

Aug 20, 2010 04:43 PM