Report Looks at Impact of Foreclosure Crisis, Recommends Future Policies
This is the second part of an article summarizing the chapter on Mortgages from a Center for Responsible Lending (CRL)research paper titled The State of Lending in America and its Impact on U.S. Households. Part one reviewed the role of the government in housing finance and looked at major players in that market.
The authors estimate that 12 million homes went into foreclosure between January 2007 and June 2012, doubling and sometimes tripling the historic foreclosure rate during any given previous quarter. Millions of homes that started the process have not yet completed it. CRL estimates that 3.3 million of owner-occupied loans originated between 2004 and 2008 completed the foreclosure process as of February 2012, with an additional 3.2 million of these loans 60 days or more delinquent or in some stage of the foreclosure.
Foreclosures have touched almost every geographic and demographic U.S. community but have hit hardest at middle- or higher-income and white non-Hispanics. However, while the foreclosure crisis has been widespread and the majority of affected borrowers have been white, the crisis has disproportionately affected borrowers of color. This disparate impact of the foreclosure crisis reflects that African-American and Latino borrowers were far more likely to receive higher-rate and other risky loan terms than white borrowers. For example, as the figure below shows, African-American borrowers were 2.8 times as likely to receive a higher-rate loan as a white borrower, and Latino borrowers were 2.3 times as likely to receive a loan with a prepayment penalty. As noted earlier, there is evidence that many of these borrowers could have qualified for more affordable and sustainable loans.