WASHINGTON — Recent African American and Latino home borrowers — regardless of their income — were much more likely to lose their homes to foreclosure than non-Hispanic whites during the ongoing housing crisis, according to a new study.
In fact, as their incomes climbed, minority borrowers saw their likelihood of foreclosure grow even larger in comparison to non-Hispanic white borrowers in the same income bracket.
That's the conclusion of "Foreclosures by Race and Ethnicity: The Demographics of a Crisis," a new report by the Center for Responsible Lending, which analyzed racial and ethnic data on more than 80 percent of the estimated 2.5 million home foreclosures completed between 2007 and 2009.
The study found non-Hispanic whites accounted for 56 percent of home foreclosures during this two-year period compared to just 16 percent for Hispanics and about 12 percent for African American homeowners.
But nearly 8 percent of blacks and Latinos who got home loans or refinanced between 2005 and 2008 ultimately lost their homes to foreclosure between 2007 and 2009, compared with just 4.5 percent of non-Hispanic whites.
That means that, overall, black and Hispanic homeowners were 76 percent and 71 percent more likely to go into foreclosure than non-Hispanic whites. And blacks and Latinos with the highest incomes were 81 percent and 94 percent more likely to face foreclosure than non-Hispanic whites with similar incomes, the study estimates.
"These disparities hold across all income lines," said Keith Ernst, the center's director of research, who co-authored the report.
Similar disparities were also found among other ethnic minorities. For instance, Hawaiian/Pacific Islanders were 40 percent more likely, overall, than non-Hispanic whites to go into foreclosure. American Indians had a 31 percent higher likelihood, while Asians were only 2 percent more likely.
The study uses data compiled by a private company, Lender Processing Services, and federal government data collected under the Home Mortgage Disclosure Act.
Of the 2 million-plus home loans issued between 2005 and 2008 that eventually went into foreclosure, the study found that subprime loans accounted for an estimated 64 percent, even though they made up only 22 percent of loans during those years, Ernst said.
The disparate impact on minorities reflects not only their historic lack of wealth in comparison to whites, but also higher unemployment rates and their geographic concentrations in states like Florida and California that were hit hard by the subprime meltdown.
In addition, previous research by Ernst and others found that black and Latino borrowers were about 30 percent more likely to receive the highest-cost subprime loans when compared to white subprime borrowers with similar risk characteristics. This type of unscrupulous activity by mortgage brokers, combined with poor loan underwriting and a lack of industry oversight, caused the subprime market to crash with devastating impact on minority borrowers.
"These loans were clearly the most abusive mortgages in the marketplace and among the least-regulated, and they were most likely to be targeted to communities of color. So in essence, what we have is a recipe for what's come to pass," Ernst said.
Looking forward, Ernst said the concentration of foreclosed properties in black and Hispanic communities would cause nearby properties in black communities to depreciate by $193 billion between 2009 and 2012, while those in Latino communities will fall by $180 billion.
"That may be a loss on paper, but it's a real loss financially because it affects (owners') ability to refinance and it affects their retirement planning," Ernst said.
With a record 4.6 percent of all mortgages in the foreclosure process, the study estimates that "among those who were homeowners in 2006, 17 percent of Latino and 11 percent of African American homeowners have lost or are at imminent risk of losing their home, compared with 7 percent of non-Hispanic white homeowners."
Of these estimated 5.7 million homeowners at "imminent risk," about 15 percent are non-Hispanic whites, nearly 22 percent are African American and more than 21 percent are Latino, Ernst said.
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