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Latina Lista: News from the Latinx perspective > Columns & Features > American Dreams > 1.3 million Latino families projected to lose their homes to foreclosure

1.3 million Latino families projected to lose their homes to foreclosure

LatinaLista — For sometime now, popular opinion has automatically blamed the downfall of the housing industry, a.k.a. home foreclosures, on subprime mortgages. It was thought that people, who were high-credit risks, were awarded these mortgages so they could fulfill their American Dream of owning a home, only to later default on their loans. Little was ever talked about how these same people were preyed upon by unscrupulous lenders who cared less if these people could afford their mortgages or not.

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Unfortunately, that same public opinion equated high-risk mortgagers as Latinos and other minorities. Yet, a study from the State Foreclosure Prevention Working Group found that more home loans are falling into foreclosure, not from bad credit loans, but from conventional loans.

These are people who had good credit histories, paid their bills and either lost their jobs or experienced a pay cut or suffered a catastrophic illness that put their finances and home at risk.

To make matters worse, when trying to get help from banks and other lenders, the help was never significant enough to really help the family.

According to the working group’s study, only four in 10 delinquent borrowers are working with loss-mitigation programs. Not enough mortgage lenders are reducing the principal balance of mortgage loans, whether prime loans or bad credit loans, either.

According to the study, only 9 percent of mortgage loan modifications in October of 2009 involved a reduction in principal balance by more than 10 percent. This is unfortunate, as other studies have shown that reducing this balance more often results in homeowners not falling into foreclosure.

As a result of this unwillingness by the mortgage industry, a new report released today by the National Council of La Raza reveals that approximately 1.3 million Latino homeowners are expected to lose their home to foreclosure between 2009 and 2012.

The repercussions of these home foreclosures are devastating to these families’ long-term financial, emotional and physical well-being — with the need to act before it gets even worse.

The Foreclosure Generation: The Long-Term Impact of the Housing Crisis on Latino Children and Families found that when a family loses their home a host of emotions and insecurities set in for not only the parents, but the children as well.

The study found five major findings:

Following the foreclosure, signs of depression, increased anxiety and tension, and feelings of guilt and resentment were commonplace. Parents reported troubling changes in their relationships with their children and the children’s relationships with each other. Several parents stated that their children blamed them for the foreclosure.

Children’s academic performance declined while problematic behavior at school increased. Several parents reported that children had to change schools as a result of the foreclosure. Parents often perceived their children as withdrawn and having trouble making new friends.

Family finances were devastated, with the families reporting an average loss of $89,155 due to the foreclosure, leaving them without a safety net to cope with financial emergencies. None of the families reported receiving significant help from their lender to avoid foreclosure.

Families were forced to change their long-term financial plans, including plans to help their children with major life expenses such as education, a car, or a home.

All but one family were left without reserves they could tap into in case of a financial emergency and many skimped on needed medical care to save money. Fifteen of the 25 families interviewed reported turning to unemployment insurance, food assistance programs, and other programs to help make ends meet.

Grant it, none of these findings is unique to Latinos. All families who undergo a traumatic event as losing a home experience the same roller coaster of emotions and family exchanges of leveling blame.

What makes it so much harder for Latinos is that given that Latinos have experienced more severe wide-spread job losses because of the industries most work in, their ability to get back on their financial feet may take longer and prove harder to achieve.

The report’s authors had several recommendations that could ease this traumatic situation and help the lending industry create an environment of helping rather than persecuting families. Among the recommendations are:

Connect families to sound financial advice to aid their financial planning and recovery.

Establish a refundable tax credit to subsidize the cost of visiting a private, certified financial planner.

Prevent future steering of vulnerable homebuyers into unsustainable mortgages by deceptive lenders.

Inform the public of the multigenerational impact of foreclosure on families through coordinated public campaigns.

However, the most important recommendation from the report’s authors is:

Provide a means for families who experienced a foreclosure to enter into homeownership again.

The old adage that “Bad things happen to good people” needs to be taken to heart and understood that when circumstances go beyond the normal control of a person — like a recession that teeters on an economic depression, a 9 percent unemployment rate and plunging home prices — a person shouldn’t be punished for the rest of their lives, and certainly not by the industry that compounded their situation by refusing to work with them in a meaningful way.

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Comment(10)

  • Avatar
    Alonzo
    February 16, 2010 at 6:44 pm

    They can rent. Contrary to progressive beliefs, renting an apartment isn’t the most horrible thing on earth that can happen to a family.
    How many were illegal aliens?

  • Avatar
    buy magic cards
    February 16, 2010 at 9:11 pm

    Hey. Great blog! I’ve been looking for some information on MTG and I think i’ve found what I’m looking for!

  • Avatar
    El Guapo
    February 17, 2010 at 4:35 am

    The fanatics who wish to blame all our nation’s ills on immigrants have also convinced themselves that the mortgage meltdown is the fault of loans to illegal immigrants. However, those who have actually investigated the situation found that the loans to illegal immigrants had lower default rates.

  • Avatar
    cookie
    February 17, 2010 at 7:45 am

    Who is blaming all of the nation’s ills on “immigrants”? Yes, some of our problems are due to illegal aliens, however. Blurring the lines again here, are we?
    I doubt there are any stats available breaking down default mortgages by citizens, legal immigrants and illegal aliens. If so, I would like to see them.

  • Avatar
    Texan123
    February 17, 2010 at 8:39 am

    Much more needs to be done to educate the public about the dangers of credit. Banks have always offered more credit than most average Americans can afford. I know that is true in my case.
    It is tempting to spend money. It feels good to acquire a home, a nice car. Some may use a credit card to help a family member in need. Bad things happen and usually are not anticipated.
    Schools should teach about the dangers of using credit. Teach about interest rates and what variable rates can do to a monthly payment. We must learn to live according to our means, not according to how much credit we are offered.
    Unfortunately for Latinos, they have been deceived, as most Americans, to have faith in banks, mortgage brokers, car salesmen, and others whose only true interest is to separate you from your money.

  • Avatar
    Karen
    February 17, 2010 at 12:32 pm

    Is Obama doing anything to address the nation’s foreclosure problem? Foreclosures have a ripple effect on the economy, so it is imperative that the federal government come up with a plan to contain the economic damage. Obama erred by not making the economy his top priority when he took office.
    Democrats are only elected when the Republicans screw up and the people want a better economy and/or a moral cleansing. That applied to Jimmy Carter (Watergate), Bill Clinton (Bush I Recession) and now Obama (Bush 2 Recession/war atrocities).
    Yet Obama has for the most part continued Bush’s policies which was not why he was elected.

  • Avatar
    Karen
    February 17, 2010 at 12:45 pm

    Re: “They can rent.”
    SIGH…
    Foreclosures don’t only impact the family who loses their home, but the whole neighborhood/city. Property values go down in neighborhoods where houses have foreclosed, and that affects local businesses too.
    “Who cares you can live in an apartment” misses the larger point. And frankly, it’s better to own a home than to rent because in a home you build equity. You can leave something to your children. When you rent you just give your money to somebody else.
    As for the loans, those faulty loans would not have been able to permeate the whole economy if Bill Clinton had not overturned Glass Steagall.
    Anybody who tries to blame the people who got bad loans for what is happening in the economy doesn’t know what he/she is talking about.

  • Avatar
    Bryan J.
    February 17, 2010 at 4:52 pm

    Hey Marisa:
    No comment on this particular story, but I wrote an article on bilingualism, which grew out of the lawsuit arising from the North Carolina bilingual secretary story. It’s also tied to Immigration. Here it is, if you please:
    http://bryanjohnsonblog.com/2010/02/17/the-u-s-is-falling-into-a-morass-of-stupidity-mandate-bilingualism/

  • Avatar
    Evelyn
    February 17, 2010 at 7:02 pm

    “Illegal Immigrants Good Mortgage Risk”
    We’ve heard a line in recent months about rising foreclosure rates. Here’s a story about a group with a surprisingly good track record of keeping up with the mortgage payments – illegal immigrants.
    HORSLEY: Hastings thinks more lenders would be going after this market if it weren’t such a political hot potato. After he was quoted in a newspaper story about the illegal immigrant mortgages, Hastings received a mountain of hate mail from anti-immigrant activists.
    Mr. HASTINGS: Here’s a great one. Mr. Hastings, are you aware that among the illegal alien population are some of the most violent criminals in the U.S.A.? You are part of the problem since these criminals will keep on raping children and murdering innocent Americans, it would only be fair that they get your kids and your wife. You’re a disgrace. Sincerely. So that was nice.
    HORSLEY: That kind of sentiment hasn’t stop mortgages for illegal immigrants, but the credit crunch largely has at least temporarily as investors shy away from all but the most plain vanilla home loans. Still, lenders say if more money becomes available, they’ll go back to making the loans. Illegal immigrants are not a scary group of people, Hastings says, they just want to own a home and they pay their bills.

  • Avatar
    Aaron
    February 18, 2010 at 4:34 pm

    Karen…..”And frankly, it’s better to own a home than to rent because in a home you build equity.”
    Sigh….Really? Tell that to those who bought a house for no money down when the prices were inflated and were involved in the bubble. They paid all interest for a decade and then when it was all over, they owed more money than the house was worth. So much for their equity.

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