1 / 24

The Effect of the Foreclosure Crisis on Asset-Building in Minority Communities

The Effect of the Foreclosure Crisis on Asset-Building in Minority Communities. Insight Center for Community Economic Development Webinar. Paul Leonard November 13, 2008. About CRL.

ymaynard
Télécharger la présentation

The Effect of the Foreclosure Crisis on Asset-Building in Minority Communities

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Effect of the Foreclosure Crisis on Asset-Building in Minority Communities Insight Center for Community Economic Development Webinar Paul Leonard November 13, 2008

  2. About CRL • Nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. • Affiliated with Self-Help, one of the nation’s largest community development financial institutions.

  3. Overview • African Americans and Latinos have disproportionately received riskiest loans and foreclosures concentrated in communities of color • Systemic failures at all points of the mortgage process. • Dramatic need for stronger policy intervention to increase modifications

  4. African Americans and Latinos Disproportionately Harmed by Subprime Lending and Foreclosures

  5. Background: Race, Ethnicity and the Subprime Market • African-American and Latinos disproportionately receive high-cost loans

  6. Background: Race, Ethnicity and the Subprime Market • CRL’s “Unfair Lending” Report: - Disparities cannot be explained by legitimate risk characteristics - Borrowers of color about 30% more likely to receive higher cost loans than similarly-risky white borrowers Possible Causes of Price Disparities: - Traditional “discrimination” - Market segmentation (e.g. marketing, targeting of high-cost vs low-cost lenders)

  7. Neighborhood Demographics and Foreclosure • What is the difference in the likelihood of foreclosure for loans in neighborhoods with high concentrations of minorities versus white neighborhoods? Increased Odds of Foreclosure by Neighborhood Type:

  8. Subprime Foreclosures Source: CRL Calculations based on McDash and HMDA

  9. Cleveland Foreclosures Concentrated in African-American Neighborhoods

  10. Estimated Total Foreclosures Source: CRL Calculations based on McDash and HMDA

  11. Foreclosures in CA, April 2008

  12. Overall Impact • CRL estimates 2.2 million subprime foreclosures • 40.6 million surrounding homes will lose value as a result of proximity to foreclosures • Total $352 billion in lost wealth to families • Disproportionate impact on African-American and Latino families and communities

  13. Causes of the Subprime Mess

  14. It Wasn’t CRA

  15. CRA-Related Higher-Priced Lending, 2006 Only 6% of Subprime Loans Made by CRA Lenders in their Assessment Areas Source Federal Reserve analsysis of HMDA data

  16. Current Market StructureLacks Accountability • Brokers • Lenders • Wall Street • Ratings Agencies • Investors • Servicers

  17. Regulations Haven’t Kept Pace with Market Changes • Federal • 1994: Weak Federal HOEPA law. • Regulators: strong capacity but limited will. • States: • Some states have stronger laws BUT • Regulators are understaffed

  18. What about the bailout? • Bailout proposals ignore fundamental cause of crisis, i.e. foreclosures and falling housing prices • Need for bankruptcy reform and systematic loan modifications • Need to drastically improve borrower protections going forward

  19. Nationally, Loan Mods Dwarfed By Foreclosures & Delinquencies

  20. Increase Mods through TARP • Require mandatory formulaic mods for loans owned by any bank that gets cash infusion • Use TARP to guarantee modified loans conditioned on sustainability standard • Buy loan servicing rights to break logjam • Purchase 2nd mortgages • Set goals & issue detailed reporting

  21. Other Strategies to Increase Mods • Change rules governing trusts so Treasury can purchase whole loans • Amend TARP to give protections to servicers that modify loans • Provide monetary incentives for servicers to modify loans • Enact mandatory loss mitigation requirement • Amend tax law so that homeowners don’t get taxed for loan mods

  22. Loan Mods in Bankruptcy • Bankruptcy judges can modify all loans (incl. for yachts, vacation homes, and for subprime lenders in bankruptcy) but not for primary residences • Zero cost to taxpayers • Could help 600,000 families keep their homes • Narrowly targeted; limited judicial discretion • Incentive to servicers to modify outside bankruptcy

  23. Don’t Throw the Homeownership Baby Out with the Foreclosure Bathwater Median Total Change in Equity: CAP Homes Purchased Between 1998 & 2007

  24. Contact Paul Leonard California Director Center for Responsible Lending Paul.Leonard@responsiblelending.org 510-379-5500 www.responsiblelending.org

More Related