"Lost Ground:" CRL Research Shows Foreclosure Crisis Not Halfway Over, Offers Breakdown By State, Race, Borrower Income

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Nov 17, 2011, 12:57 ET

WASHINGTON, Nov. 17, 2011 /PRNewswire-USNewswire/ -- 2.7 million of the mortgages made at the height of the housing bubble have ended in foreclosure and at least another 3.6 million likely will fail in the next few years, a new CRL research report shows. That means the nation is not yet midway through a foreclosure crisis that mires the economy.

The report—Lost Ground, 2011—finds that while most people who have lost their homes have been white and in middle- or higher-income brackets, African-American and Latino families have suffered a disproportionate share of losses. The research also shows that differences in income and credit history don't explain why communities of color have been harder hit—but predatory mortgages do. To read the full report go to http://rspnsb.li/vNtV2t.

Among the report's findings:

Foreclosure rates for mortgages with prepayment penalties or other predatory terms have been much higher than loans without such features.
African Americans and Latinos across the credit score spectrum were more likely to receive a high-cost mortgage with risky features. African Americans and Latinos with good credit (a 660+ FICO score) received a high-cost loan more than three times as often as white borrowers.
High concentrations of risky mortgages help explain why African Americans and Latinos at every income level have been hit harder by foreclosures than whites with similar incomes. For example, the foreclosure rate for low- and moderate-income African Americans is about 80% higher than that for comparable white households. Foreclosure rates for higher-income Latinos is more than three times that of higher-income whites.

In addition to publishing the report, CRL has developed an online interactive map showing completed foreclosures and serious delinquencies for U.S. states and major metropolitan areas; CRL's website also has charts showing these statistics by race, borrower income, neighborhood income and more. Also attached here is CRL's "Foreclosure Damage Index" of report statistics for mortgages made between 2004 and 2008.

The bottom line: The foreclosure crisis isn't going away. Families that could have benefited from homeownership are instead being kicked down the economic ladder, home prices keep falling, and economic recovery remains stalled. Many home losses have been and will be unnecessary. With so many losses still ahead, lenders must end loan servicing abuses and get serious about sustainable loan modifications that keep families in their homes.

Foreclosure Damage Index

The following statistics apply to mortgages made between 2004 and 2008 as described in CRL's research, "Lost Ground, 2011."

% of loans that have ended in foreclosure ("fcl.")	6.4% (2.7 million loans)
% of loans at immediate, serious risk	8.3% (3.6 million loans)
% of risky ARMs(1) that have ended in fcl.	12.8%
% of fixed rate loans or standard ARMs	3.3%
# lost homes - African-American borrowers	397,000
# lost homes - Latino borrowers	635,000
# lost homes – white borrowers	1.5 million
% lost homes or at serious risk –white borrowers	12%
% lost homes or at serious risk - Latino & African-American borrowers	25% for each
Likelihood that an African-American borrower received a subprime loan	2.8x as often as whites
Likelihood that a Latino borrower received a subprime loan	2.2x as often as whites
Likelihood that an African-American or Latino borrower with good credit received a subprime loan	3x as often as whites
Likelihood that an Asian borrower with good credit received a risky ARM	1.7x as often as whites
Income group that fares worst in weak housing markets	Low-income borrowers
Income group that fares worst in "boom & bust" markets	High-income borrowers
% of fcls. or at risk in low-income neighborhoods	25%
% of fcls. or at risk in high-minority neighborhoods	20%

(1) We define "risky ARM" as an adjustable-rate mortgages with any one of these features: interest rate resets of less than five years; negative amortization; or interest-only payment schedules. A standard ARM is an adjustable-rate mortgage that does not include any of those features.

SOURCE Center for Responsible Lending