LatinaLista -- Home ownership has long been considered the heart of the "American Dream." Not just for immigrants but native born Americans as well.
However, these days talk of that aspect of the American Dream for Latinos, African Americans, Native Americans and Asians is like talking about the existence of unicorns -- something that is becoming more of a myth.
Today, the Center for Responsible Lending released the report
Foreclosures by Race and Ethnicity: The Demographics of a Crisis. It's findings are alarming when considering that a person's home is more just his/her castle -- it's their main source of personal wealth.
According to the report, it's estimated that among recent borrowers nearly 8 percent of both African Americans and Latinos have lost their homes to foreclosures, compared to 4.5 percent of whites -- and it's not over yet.
The report's authors, citing independent analysts, disclose that by the time the housing crisis is over there will have been 10-13 million foreclosures. Yet, though non-Hispanic whites represent the majority of at-risk borrowers, it's African-American and Latino borrowers who are more likely to be at imminent risk of foreclosure (21.6% and 21.4%, respectively) than non-Hispanic white borrowers (14.8%).
These high losses of homes in communities of color just aggravate the disparity in home ownership, a.k.a. personal wealth, between non-Hispanic whites and Latinos and African Americans.
The question everyone has always asked in regard to the foreclosure crisis is how did so many Latinos and African American home buyers end up in this mess? The answer is simple:
...not only were borrowers of color more likely to receive subprime loans than white borrowers, but within the subprime market, borrowers of color were more likely to receive the most expensive loans and were more likely to receive subprime terms associated with increased default risk, such as prepayment penalties.
Previous research has shown that African-American and Latino borrowers were about 30% more likely to receive the highest-cost subprime loans relative to white subprime borrowers with similar risk profiles and that subprime loans in communities of color were more likely to carry prepayment penalties than subprime loans in majority communities.
Combine that with the facts that more Latinos and blacks are out of work and have fewer resources/savings to tide them over till a new job is found and it becomes a perfect storm of events for losing their homes.
To add insult to injury, foreclosed homes in neighborhoods of color bring other consequences than a potential eyesore on the block.
As a result of the disproportionate number of foreclosures borne by African Americans and Latinos, the "spillover" costs, in the form of depreciated home values, increased crime rates, and community blight, are likely to hit communities of color particularly hard.
Based on their share of total home value and our estimated foreclosure rates, we calculate that the spillover wealth lost to African-American and Latino homeowners between 2009 and 2012 as a result of depreciated home values alone will be $193 billion and $180 billion, respectively.
Furthermore, this crisis is not over. Though we have estimated that 2.5 million foreclosures have been completed and 5.7 million more borrowers are at imminent risk, industry experts predict many more are to come.
The authors of the report offer their solutions which basically focus on policy changes and regulation of the mortgage industry. Yet, nothing is said of the responsibility of the homebuyer.
It's one thing to be deceived into purchasing a home beyond one's means, but it's another to ignorantly enter into a situation buying something more than what can be afforded.
If there is a lesson to be learned, it's that consumers have to look out for themselves. After all, in this foreclosure crisis it's not the lenders losing their homes.
If the government really wants to help consumers, there's an easy way: Set up a simple web site where people enter in the state they live in, their yearly salaries and how much, if anything, they can put down. Then calculations are automatically made across the board for every loan type available in that state and how much house they can afford.
People can print it out, and hopefully, don't just use it as a guideline but their bible when shopping for homes.
It's all about building personal wealth -- but at an affordable and responsible rate.