Nuestro Hogar:

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Nuestro Hogar Addressing the Foreclosure Crisis
in the Latino Community
Thursday, October 30, 2008
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An Overview

• Overview of the Foreclosure Crisis
• Predatory Lending Practices
• Increase in Subprime Lending
• Types of Predatory Loans
• Latinos and the Crisis
• Lending Practices Affecting Minorities and
  Latinos Specifically
• The Impact of the Crisis on Latinos
• Policy Responses to the Crisis
• Recommendations

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An Overview of The Foreclosure Crisis

• National Default and Foreclosure Rates

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The Numbers

• In June 2007, more than one million mortgages
  nationwide were in default, a 50 increase from
  two years prior
• It is estimated that approximately 2.2 million
  subprime foreclosures will take place in 2008 and
  2009, resulting in an aggregate 352 billion loss
  in property values
• ACORN estimates that 1 trillion in ARMs will
  shift to a higher interest rate within the next
  few years

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Increase in the Subprime Market

• One estimate suggests that between 1996 and 2006
• the subprime mortgage market grew from 97
  billion to 640 billion
• increased from 12 to 21 of the market share

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Predatory Practices

• Adjustable Rate Mortgages (ARMs)
• Pre-Payment Penalties
• Interest-Only Loans
• No Doc/Low Doc/Lack of Stated Income Loans
• Negative Amortization/Options ARMs/Deferred
  Interest Loans
• High Debt Service-to-Income Loans
• Piggyback Mortgages
• Jumbo Mortgages
• Broker Steering

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Latinos in the Crisis

• Latinos were targeted by lenders, receiving
  high-cost loans at disproportionate rates
• As ARM interest rates begin to balloon, Latinos
  have begun to face foreclosures and loss of their
  homes
• Due to Latino saving and investing practices, the
  loss of a home or depreciation of its value can
  be crippling to their financial well-being.

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Practices Targeting the Latino Community

• Heavier Concentration of Predatory Lenders in
  Communities of Color
• Spanish-language Usage in Predatory Lending
  Practices
• ITIN and No/Low Document Verification Loans
  Targeted Latinos
• Narrowing Opportunities for Refinancing

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Subprime Loans and Foreclosuresin Minority and
Latino Neighborhoods

• In Chicago, high-risk loans comprised 20.5 in
  neighborhoods that were at least 80 minority and
  5.6 in neighborhoods that were less than 10
  minority, a high-low disparity of 3.7
• Latinos were 1.5 times more likely to receive
  high cost loans than Whites
• Latinos received approximately 1 of every 4 high
  cost home purchase loans and only 1 of every 8
  prime loans
• Nationwide, in 2004, Latinos were between 29 and
  142 more likely than Whites to receive a
  higher-rate loan

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Foreclosures in the CommunityThe Aurora Example
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A Community Foreclosed
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The Snapshot of a Neighborhood
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5 Chicago Wards with the Largest Hispanic
Populations
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Latinos in Chicago and the Suburbs

• In the eleven Chicago wards with the highest
  Latino populations
• Every ward has seen an increase in foreclosures
  in the first half of 2008
• In six of the eleven wards, the number of filings
  more than doubled
• The aggregate REO auction value was 134,000,174
  for the first half of 2008
• In the five cities with the highest Latino
  populations in Illinois, excluding Chicago
• every city showed an increase in the number of
  foreclosure filings
• The aggregate REO auction value was 144,218,943
  for the first half of 2008

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The Impact on the Latino Community

• Latinos are estimated to lose between 76 billion
  and 98 billion for mortgages made between 2000
  and 2008

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Latinos Before the Crisis

• Latino expenditures on mortgage interest and
  charges increased between 1996 and 2006 by 216
• Hispanics were 2.5 times more likely than
  Non-Hispanics to save money for a house
• Latinos were also 2.17 times more likely to own a
  house than to own stock assets, compared with
  1.16 times for non-Hispanics
• More than half of the Latinos surveyed owned a
  house, but less than a quarter owned stocks

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The Impact

• Loss of Wealth
• Latino borrowers will lose an estimated 76
  billion to 98 billion for mortgages made between
  2000 and 2008
• Declining Property Values
• An estimated additional 32 billion will be lost
  as a result of lower property values overall
• Financial Security
• Strain on Affordable Housing, Including the
  Rental Market
• Over 35 of Chicago foreclosures in 2007 were in
  small multi-family dwellings, affecting somewhere
  between 9,644 and 28,923 housing units
• It is estimated that as many as 18,300 rental
  households could have been affected by the
  foreclosure crisis in 2007
• Increase in Overcrowding
• From 1985 to 2005, the number of Latino
  households living in overcrowded conditions
  doubled

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Foreclosure Counseling at the Spanish Coalition
for Housing
The Spanish Coalition for Housing has had 997
foreclosure counseling cases in 2008, already
more than twice as many as last year and over 24
times as many as in 2005.
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Recommendations

• We Need Appropriate Policies to Address
• Foreclosure Mitigation
• Long-term Economic Losses of Families
• Affordable Housing
• Overcrowding Relief