By Nisa Islam Muhammad, Special to the NNPA from the Final Call –
(NNPA) - Luis and Michelle Gonzalez wanted the American dream of home ownership. They shopped around and found an affordable house in a good neighborhood. Things were going fine until Gonzalez lost his job. Their dream has become a nightmare with foreclosure looming.
“I don't know how we got here,” said Michelle Gonzalez. “We could afford this home but the mortgage kept going up and up and up. I didn't know this was going to happen. We want our home but it may be too late.”
This family has joined the ranks of Latinos and Blacks in California experiencing significantly higher foreclosure rates than non-Hispanic borrowers in the state, according to first-of-its-kind research released in August by the Center for Responsible Lending.
California leads the United States in the worst foreclosure crisis since the Great Depression. Across the country, foreclosures have hit an all-time high, with nearly 1 in 10 homes with a mortgage currently in some stage of foreclosure.
In the Golden State, nearly 1 in 8—or approximately 702,000—homes is currently in foreclosure, the economy is in ruins and unemployment stands at 12 percent and higher in Latino and Black communities.
These groups represent more than half of all foreclosures, with 48 percent of foreclosures hitting Latinos and 8 percent hitting Blacks.These borrowers were more likely to receive higher-cost subprime mortgages with loan terms that typically increased the risk of default, compared with safer loans made to similarly situated non-Hispanic White borrowers.
“Whether we are from Los Angeles or Modesto, all Californians are severely impacted by the foreclosure crisis,” said Paul Leonard, director of the Center for Responsible Lending California office.“We need solutions now that ease the pain everywhere.” His office has been at the forefront of efforts to respond to the state's foreclosure crisis.
The report, “Dreams Deferred: Impacts and Characteristics of the California Foreclosure Crisis,” analyzed more than 600,000 foreclosures in the state and also found that over three-quarters of all California foreclosures were on relatively modest properties, not “McMansions” as often believed.
Additionally, while major cities like Los Angeles and Sacramento have suffered the greatest number of foreclosures, communities in the Central Valley and Inland Empire have been severely harmed by high concentrations of foreclosures.
The report explains multifaceted damages to families from foreclosures. First, the disruption and upheaval associated with being evicted from one's home, and the effects this displacement can have on a family's education, health and employment, are significant.
“Where will we live now? Where will my children go to school? I don't have answers. This is so terrible,” said Luis Gonzalez.
Second is the loss of homeownership and the tax benefits and wealth that historically have accompanied it. Homeownership has been the primary source of economic mobility and financial security in this country, as home equity is often tapped to start a new business, pay for higher education and secure retirement.
In addition, home equity provides a financial cushion against unexpected financial hardships, such as job loss, divorce or medical expenses. Homeownership is also the primary means by which wealth is transferred to future generations.
The foreclosure crisis threatens the financial stability and mobility of families across the country, not just now but also into the future. Further, in addition to the individuals and families who lose their homes to foreclosure, nearby homeowners are affected when they experience depreciated home values, as are communities, which suffer the financial and non-financial consequences of abandoned properties and neighborhood blight.
“NCLR has sounded the alarm for the last two years about the devastating impact foreclosures have had on communities of color, but this report reveals a shocking level of concentration among Latino homeowners in California,” said Janet Murguía, president and CEO of the National Council of La Raza, a Latino rights group.
“Dishonest brokers peddled their high-cost loans, steered our families into risky products designed to fail and now Latinos and all of California are paying the price.”
The report provides policy recommendations to reduce unnecessary foreclosures:
Require servicers to complete the review of loan modification applications before beginning the foreclosure process.This is the central feature of California bill SB 1275 which will be considered by the full California Assembly this week before being sent to the governor.
Incorporate principal reduction into loan modification programs, especially where housing prices have contributed to a lack of affordability.
Lift the ban on judicial modification of principal residence mortgages by bankruptcy judges.
Expand funding and capacity of housing counseling agencies and legal aid providers.