Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures

Publication Date

November 2011

Author(s)

Carolina Reid, Debbie Gruenstein Bocian, Roberto G. Quercia, Wei Li

Client/Funder

Sears Consumer Protection and Education Fund, Center for Responsible Lending

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As the nation struggles through the fifth year of the foreclosure crisis, there are no signs that the flood of home losses in America will recede anytime soon. Moreover, while the majority of people affected by foreclosures have been white families, borrowers of color are more than twice as likely to lose their home as white households.

Lost Ground, 2011 builds on the Center for Responsible Lending’s longstanding efforts to document the severity and demographic dimensions of the foreclosure epidemic.

The report’s top findings:

• The nation is not even halfway through the foreclosure crisis. Among mortgages made between 2004 and 2008, 6.4 percent have ended in foreclosure, and an additional 8.3 percent are at immediate, serious risk.
• Foreclosure patterns are strongly linked with patterns of risky lending. The foreclosure rates are consistently worse for borrowers who received high-risk loan products that were aggressively marketed before the housing crash, such as loans with prepayment penalties, hybrid adjustable-rate mortgages (ARMs), and option ARMs.
• Foreclosure rates are highest in neighborhoods where these loans were concentrated. The majority of people affected by foreclosures have been white families. However, borrowers of color are more than twice as likely to lose their home as white households. These higher rates reflect the fact that African Americans and Latinos were consistently more likely to receive high-risk loan products, even after accounting for income and credit status.