Nov. 21, 2011 is the source for expert information and news about credit cards, credit scores, credit reports and the credit business.

By Michael Schreiber

The Center for Responsible Lending released a study today that documents a trend in American foreclosures that is startling, yet not surprising. The study, "Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures," co-authored with the Center for Community Capital at the University of North Carolina, Chapel Hill, presents data in support of the claim that African Americans and Latinos are "more than twice as likely to lose their home as white households." Beyond that, the study suggests that the foreclosure crisis isn't even close to being over.


This latest report builds on previous studies by the CRL in the area of ethnicity and foreclosure. In 2006, they published, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," which predicted the sub-prime housing crisis before it hit, outlining the potentially disproportionate impact it would have on African American and Latino homeowners given the fact that a higher than average number of subprime loans are made in these communities. In 2010, the CRL further zeroed in on the subject with the report, "Foreclosures by Race and Ethnicity: the Demographics of Crisis." It estimated that "17% of Latino homeowners, 11% of African-American homeowners, and 7% of non-Hispanic white homeowners already have lost or are at imminent risk of losing their home."

The newest report follows up on the previous research and addresses three primary issues:

"First, we consider who has lost their home to foreclosure, and who is still at risk. We look at both the race/ethnicity and income of borrowers, and explore how the impact of foreclosures on different socioeconomic and demographic groups varies depending on where they live. Second, we look at what kind of mortgages different borrowers received to better understand the relationship between loan characteristics and defaults. Finally, we examine where the crisis has had the greatest impact, assessing which areas and types of neighbor- hoods have been most affected."

Among the most notable findings in the paper is the contention that the foreclosure crisis is not even halfway over. "Among homeowners who received loans between 2004 and 2008, 2.7 million households, or 6.4 percent, had already lost their homes to foreclosure as of February 2011," the study notes. "Strikingly, an additional 8.3 percent—3.6 million households—were still at immediate, serious risk of losing their homes."

2005-2008 foreclosure risk by race data- It's worse now.

The study also unsurprisingly argues that certain types of loans are more likely to be delinquent or in foreclosure—including those originated by brokers, hybrid adjustable rate mortgage loans (ARMs), option ARMs, loans with pre-payment penalties and high interest rate loans. (Earlier this month we wrote about a spike in foreclosure filings which is arguably the result of option ARM loans resetting, which for some borrowers means as much as a 300% jump in their monthly mortgage bill.)

Finally, the study found that nearly 25 percent of all Latino and African America borrowers have either had their homes foreclosed upon or are "seriously delinquent." That's compared to just under 12 percent of white borrowers (see the chart below, taken from the recent study). Center for Responsible Lending: Foreclosure & Race

The study goes on to suggest that the racial divide persists even when income is factored in—meaning that a poor African American or Latino homeowner is more likely to be in or at risk of foreclosure than an equally poor white person. The study also ties the promulgation of risky loan types to these communities, further supporting the contention that the communities were in fact targeted with riskier loan products. (In August, we wrote about one mortgage broker that was fined $125 million by the Massachusetts Attorney General for such practices.)