Two studies just released confirm what we already know: we're less than halfway out of the foreclosure mess. But one of them drills down deeper to expose a racial subtext to the story.
According to new data from the Mortgage Bankers Association, the rate of borrowers who have fallen three or more months behind in their mortgage payments dropped to 3.5 percent of all mortgages in the third quarter. While that's down from 5 percent a year ago, it's still more than three times the normal rate of 1 percent that prevailed before the housing bubble burst in 2007.
Michael Fratantoni, MBA chief researcher, estimates that we're still three to four years away from returning to normal foreclosure levels.
But a new report from the Center for Responsible Lending, "Lost Ground, 2011," finds that while most people who have lost their homes to foreclosure have been middle- to upper-class whites, Latino and African-American families have suffered a disproportionate share of the losses.
CRL data reveals that among mortgages made between 2004 and 2008, 2.7 million or 6.4 percent ended in foreclosure and 3.6 million, or 8.3 percent, remain at "immediate, serious risk" of going under. Of homes lost to foreclosure during the period, 1.5 million belonged to whites, 635,000 to Latinos and 397,000 to African Americans.
Among the CRL findings:
- African-Americans and Latinos across the credit-score spectrum were more likely to receive a high-cost mortgage with risky features.
- African-Americans and Latinos with good credit (a 660+ FICO score) received a high-cost loan more than three times as often as white borrowers.
- The foreclosure rate for low- and moderate-income African-Americans is about 80 percent higher than that for comparable white households.
- Foreclosure rates for higher-income Latinos is more than three times that of higher-income whites.
"Families that could have benefited from homeownership are instead being kicked down the economic ladder, home prices keep falling, and economic recovery remains stalled," the report concludes. "Many home losses have been and will be unnecessary. With so many losses still ahead, lenders must end loan servicing abuses and get serious about sustainable loan modifications that keep families in their homes."
What do you think? Were America's Latino and African-American homeowners disproportionately set up for foreclosure by racist lending practices?
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