Latino and African-American homeowners have a disproportionate share of foreclosures nationwide compared with their percentage of homeownership, according to a new study.
The study, conducted by the Center for Responsible Lending, shows that Latinos in California are especially hard hit. Perhaps this is a type of discrimination that is simply an extension of the days when minorities couldn't get loans or buy in certain neighborhoods.
These days, Latinos and blacks get loans, but the loans typically are at a higher rate than what whites pay. Although the majority of families (an estimated 56%) who lost homes were non-Hispanic whites, Latino and African-American families disproportionately received the most expensive and risky types of loans during the subprime lending boom, according to the study, making them more heavily affected.
When blacks and Latinos then turn to the banks for help refinancing or modifying the terms of their loans, the banks aren't so willing to help unless a nonprofit counseling agency intervenes on their behalf, according to a study by the Urban Institute. Without outside intervention, the homeowner is more likely to lose their home.
The Urban Institute's independent study found that moderately delinquent homeowners and those facing foreclosure who received housing counseling through the National Foreclosure Mitigation Counseling Program were 60 percent more likely to avoid losing their home to foreclosure than homeowners who did not seek counseling.
Latinos, who represent 36.6 percent of California's population, received 29.9 percent of all mortgage loans originated between 2004 and 2008, but were subject to 48.7 percent of foreclosures. Further, Latino owners lost 301,086 homes to lenders -- almost half the state's 625,356 foreclosures during that period. That means Latino households in California produced nearly 50 percent of the state's foreclosures. The loan defaults are concentrated in the state's Central Valley, which includes Sacramento, according to CLR downloadable data.
But it's not just California. It's also in Miami, Chicago, St. Louis. It's nationwide. There are steps homeowners can take, however, to help ease the pain -- or avoid it.
Know the true cost of your loan
Is the monthly payment you're quoted a PITI, meaning it includes property taxes and mortgage insurance? Sometimes the monthly payment that a lender quotes you might not include these other fees, artificially deflating what you will owe.
Essential How-To-Guides on AOL Real Estate: Home Buying, Selling, Renting, Moving and Home ImprovementAvoid adjustable rates
A low interest rate the first few months means lower payments until the mortgage adjusts. What a buyer thought they could afford, it turns out a few months later, they can't.
"With Latinos we find many more cases of deceptive lending and use of teaser rates that mask the true terms of the mortgage," says Richard Kahn, author of "Winning Against Foreclosure." "Once they are in the mortgage, they can afford the payments until the adjustment."
Understand what you sign
If you need more time to read through mortgage terms, or you need a copy in your native language so that you can better understand the fine print, then don't hesitate to ask.
The laws that require people who don't speak English fluently to have exact full duplicates of documentation in their native language are rarely complied with, says Kahn, who is also a Miami-based mortgage fraud expert witness through Forensic Professionals Group USA.
Predatory lending is also as much at the forefront in the African American community as it is with Latinos, he says.
"I don't know if it is that these folks are more trusting, less educated, less serious about protecting themselves from predatory lending or what. It is difficult to say after the fact. We are a forensic firm that looks into the paperwork, not the borrower's individual stories," he says. "The one common denominator we see is wholesale deception, deceit and misrepresentation on these folks especially."
Avoiding scams and finding help
"It seems that the Latino and African American loans we look at are as if the lenders had no fear at all of misrepresenting the mortgages and not following the federal rules. Foreclosure is the exit strategy." This means that desperate homeowners are more vulnerable to foreclosure rescue scams.
"The sooner that a homeowner believes they may be in danger of foreclosure, even before they miss a payment, they should go see a credit counselor first," says Erin M. Angell Collins, spokesperson for NeighborWorks America, the Congress-created nonprofit that runs the National Foreclosure Mitigation Counseling Program. "I urge homeowners who have been especially hit hard to go to foreclosurecounselor.org and to look up housing counseling agencies in your community," she says.
University of Chicago systems administrator Vanessa Matthews, 49, sought counseling with such a program, a "Fix Your Mortgage" foreclosure-prevention program, after talks with her lender, Ocwen Financial.
Not long after homeowner Matthews separated from her husband, she experienced economic hardship. Not only had she lost the second income, which had helped pay the $2,539 PITI mortgage payment on their Bronzeville duplex, but her mother, who was renting the first-floor unit from her, lost her job and couldn't pay the rent.
"Things had gotten pretty bad," says Matthews, who purchased her home seven years ago with a mortgage amount of about $250,000. "It was unbelievable to me that the banks weren't willing to work with me. I had never been late on my mortgage." Losing her home would have meant she, as well as her three teen-age foster children and her mother, would have been displaced.
In Chicago, the nation's third largest city, 29% of area mortgages are underwater, meaning that more is due on the loan than the home is worth. Minorities are disproportionately affected by these loans, which puts them in danger of foreclosure.
Matthews, however, did receive a permanent loan modification with the help of the Neighborhood Housing Services of Chicago. Through the program, Matthews' monthly mortgage payments were nearly cut in half to $1,398. The interest rate was cut from 7 percent to 2 percent for five years (when it will adjust to 3.95%), allowing her to keep her home.
At the height of the housing market, high-cost loans made up 60 to 75 percent of all loans given to African Americans and Latinos in low-to-moderate-income Chicago neighborhoods versus 34 percent for the city at large, according to Neighborhood Housing Services of Chicago.
"Even though African Americans are 9 percent of the nation's homeowners, they make up 26 percent of the clients in the program," says Collins. Latinos make up 8 percent of the nation's homeowners, a decrease from 11 percent in 2009, but 21 percent of the NFMCP program clients are Hispanic homeowners, she says. "They are in all stages of foreclosure or about to enter into foreclosure."
When you're nearing foreclosure, non-profit credit counseling is a good bet to help you negotiate directly with lenders, says Kahn. "Relying on the government to protect minorities is like relying on the police to prevent a crime," he says. "The police clean up and investigate after the fact mostly, and so do the authorities in mortgages. At that time, unfortunately, it is too late."
Posted By: Siebra Muhammad
Thursday, August 26th 2010 at 1:46PM
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