Foreclosure Storm: Minorities Swept Up in Greater Numbers


by Doug Miller

The data are finally starting to come in, and the numbers are horrifying. The Great Recession inflicted wounds on Black America that will cripple communities for years to come. Depreciation of foreclosure-devastated neighborhoods will cause between $193 billion and $180 billion in wealth to be “drained from black and Latino communities.”


Foreclosure Storm: Minorities Swept Up in Greater Numbers

by Doug Miller

This article previously appeared in DefendersOnLine, a publication of the NAACP Legal Defense and Educational Fund.

Eleven percent of African-American and 17 percent of Latino homeowners already have lost or are in imminent danger of losing their homes to foreclosure.”

A tornado of foreclosures spawned by the subprime mortgage collapse has disproportionately flattened black and Hispanic homeowners, according to new research by the Center for Responsible Lending (CRL), sucking hundreds of billions of dollars in wealth from communities of color.

The report, Foreclosures by Race and Ethnicity: The Demographics of a Crisis [1], estimates that 11 percent of African-American and 17 percent of Latino homeowners already have lost or are in imminent danger of losing their homes to foreclosure. Among recent borrowers, the research has disclosed, nearly 8 percent of both blacks and Latinos have lost their homes compared to 4.5 percent of whites.

Using government and industry data to estimate the number of foreclosures in recent years, as well as their impact by race and ethnicity, the CRL study estimates that 2.5 million foreclosures were completed from the beginning of 2007 through the end of 2009. It also projects that another 5.7 million borrowers are at risk of having their mortgages foreclosed.

Citing analyses by independent financial services organizations like Credit Suisse and Goldman Sachs, the center estimates that somewhere between 10 and 13 million foreclosures will have occurred by the time the housing storm has finally passed.

[2]Wade Henderson, president and CEO of the Leadership Conference on Civil and Human Rights, said the report describes “the devastating impact that the casino culture of Wall Street and the mortgage industry is having on communities of color. These hardworking families have borne the brunt of an anything-goes regulatory system that has turned a blind eye toward predatory lending and the needs of vulnerable consumers who may never recover the wealth they have lost.”

Somewhere between 10 and 13 million foreclosures will have occurred by the time the housing storm has finally passed.”

Debbie Bocian, a senior researcher behind the CRL study, confirmed that while the majority of families who already have lost homes in the foreclosure onslaught – about 56 percent – are non-Hispanic and white, “given how many mortgages African Americans and Latinos have taken out relative to mortgages of whites over the same time period, their share of foreclosure is higher.”

In terms of borrowers who have not yet suffered foreclosure but are at imminent risk, Bocian said figures available from the Mortgage Bankers Association (MBA) covering about 85 percent of the market were statistically scaled to reflect the entirety of the population. The results show that the percentages of African-American and Latino borrowers likely to have their mortgages foreclosed, 21.6 and 21.4 percent respectively, are greater than the estimated percentages of non-Hispanic white borrowers at risk, which came in at 14.8 percent.

The MBA did not respond to an inquiry about the validity of the claim.

The report goes on to say that as the foreclosure crisis continues to threaten the financial stability of families across the country, “it will be particularly devastating to African-American and Latino families, who already lag their white counterparts in terms of income, wealth and educational attainment.”

The CRL study estimates that between 2009 and 2012, a respective $193 billion and $180 billion in spillover losses – indirect losses in wealth resulting from depreciation of properties in neighborhoods particularly hard hit by foreclosures – will have been drained from black and Latino communities.

Doug Miller is a writer living in Westchester County, New York.

1 Comment

"Shadow Inventory" about to come home to roost


Did the Federal Reserve collude with the big banks to hold millions of houses off the market until the Fed finished adding $1.25 trillion to the banks reserves? It sure looks that way. This is from Bloomberg News:

"U.S. home foreclosures reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to RealtyTrac.Inc.

Bank repossessions climbed 44 percent from May 2009 to 93,777, the Irvine, California-based data company said today in a statement. Foreclosure filings, including default and auction notices, rose about 1 percent to 322,920. One out of every 400 U.S. households received a filing." (Bloomberg)

Inventory steadily declined during the period the Fed was exchanging cash-for-trash (toxic assets and non performing loans for reserves) with the banks. Now inventories have begun to rise again as the banks get back to business as usual, in other words, throwing people out of their homes. The sudden uptick in repossessions and property seizures coincides perfectly with the ending of the Fed's giant "no bankster left behind" program. Clearly, there must have been a quid pro quo.

What's so impressive about Bernanke's trillion dollar sleight-of-hand operation; is its utter simplicity. We're just talking "supply and demand" here, not rocket science. The banks agreed to cut supply (by temporarily stockpiling homes) while the Fed loaded them up with a cold trillion-plus in reserves. Meanwhile, John Q. Public assumed (incorrectly) that Bernanke's program helped to stabilize prices. It's a very ingenious deception worthy of a professional conman.

Readers may remember that quantitative easing (QE) was promoted as a way to increase lending to consumers and to keep interest rates on mortgages low. But that was all just public relations hype. Consumer lending contracted in the last year while interest rates on the 30-year mortgage have fallen since Bernanke's QE program ended at the end of March.

So what does it all mean? It means the public was snookered yet again. It also means that housing prices will fall further as banks dump more inventory on the market. How far prices drop will depend on how quickly the banks clear their shadow inventory which, in turn, depends on (secret) agreements they've made with the Fed and the other banks. Housing inventory is being released in drips and drabs according to an unknown plan. Some would call it price-fixing. Here's an excerpt from an article in the Wall Street Journal that says that there's a 9-year backlog of distressed homes:

"How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern. As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier....