Recent Events
October 2011
At Women In Government's 12th Annual Southern Regional Conference, foreclosure prevention was a feature topic. Sophie Link from the Homeownership Preservation Foundation presented on her work with on National Foreclosure Mitigation counseling programs and research. This session featured the kinds of counseling available, the methods of counseling that have proven effective in reducing foreclosures, and ways in which state legislators could get involved and learn more about these initiatives. Sophie Link has been a non-profit professional who is responsible for policy work in Washington DC, representing the Homeownership Preservation Foundation to Capitol Hill, federal agencies, and to non-profit partners. In her presentation, she discussed The Joint Center for Housing Studies at Harvard describes the future need of counseling with over 2 million homeowners in foreclosure and another just under 2 million over 90 days delinquent. It highlights the growing need for seniors, minorities, and younger homeowners as they will make up the majority of heads of households between now and 2020. It also highlighted the growing importance of counseling, including pre-purchase and rental counseling in helping homeowners plan for and manage their expenses, noting that since 2001 2million more homeowners are paying more than 50% of their income on their mortgage. She also spoke about the Urban Institute study describes strong evidence that counseling reduces the number of foreclosures and REOs that help homeowners receive larger reductions in their monthly mortgage payments with modifications and are better able to sustain those mortgages. Ms. Link also made note of The Federal Reserve Board work stresses that early outreach is key, noting that 30-60 day delinquency is the sweet spot for successful counseling. It highlights a 200% higher probability for a consumer to receive a modification when counseled as well as 5 basis points lower interest rate with a modification when counseled. Additionally, Ms. Link highlighted the National Coalition on Aging highlights that 35% of seniors in 2009 had balances on their mortgage, a huge increase compared to 24% of seniors in 1999. It also points to the vulnerability of that population by noting that 45% of scam related calls are from seniors. HUD cuts that will force mandated counseling to be paid by consumers, instead of with grants, in an environment where over 40% of seniors are over 200% below poverty levels. Ms. Link recommended several resources of which legislators and their constituents should be aware: Ms. Link recommended several resources of which legislators and their constituents should be aware:
Information on Home Mortgages and Foreclosures
As noted by the Center for Responsible Lending, the aggressive marketing of subprime loans has a ripple effect that reaches far beyond the families who receive these loans. Entire communities are hurt. Most directly impacted are the millions of families losing their homes—including low-income, working families and minority families, who receive a high share of subprime loans. [1]
Further illustrating the ripple effect that has created a foreclosure crisis: in 2009 alone, foreclosures will cause 69.5 million nearby homes to suffer price declines averaging $7,200 per home and resulting in a $502 billion total decline in property values. During the period 2009-2012, the Center for Responsible Lending projects that foreclosures will cost 92 million U.S. families some $1.9 trillion in lower home values—an average of $20,300 in lost wealth per household. [1] State policy makers can help protect homeownership by sponsoring legislation requiring mediation in foreclosures, creating a moratorium on foreclosures, enacting protections against predatory mortgage lending, and providing counseling and financial assistance. [2]
[1] Center for Responsible Lending; [2] PolicyforResults.org
How are families affected by foreclosure?
According to a study by the Urban Institute, when foreclosures occur, the families living in the foreclosed properties are almost always obligated to move. Other major types of impacts that affect the well-being of families include:
- Displacement and housing instability
- Financial insecurity and economic hardship
- Personal and family stress, disrupted relationships, and ill health [3]
Research indicates that children who face home loss are more likely to move from school to school. This school mobility is associated with poor educational outcomes and behavioral problems, and family economic stress is associated with poor health outcomes for children. [4]
The demographic hardest hit by predatory lending in the sub-prime market includes racial and ethnic minorities, the elderly, women, and low- and moderate-income borrowers. [5] Minorities in particular are receiving a disproportionately higher number of high-cost loans and in turn stand to lose substantial equity as a result of high debt payments. The Center for Responsible Lending reported that 53 percent of African-Americans and 42 percent of Latino families who bought homes in 2006 have already lost or will lose their homes to foreclosure in the next few years, as compared to 22 percent of white borrowers facing foreclosure. [5]
[3] Urban Institute, G. Thomas Kingsley, Robin E. Smith, and David Price, The Impacts of Foreclosures on Families and Communities, May 01, 2009
[4] First Focus, Phillip Lovell and Julia Isaacs, The Impact of the Mortgage Crisis on Children, May 2008
[5] Center for Responsible Lending, http://www.responsiblelending.org/mortgage-lending/
Facts:
- The national foreclosure rate tripled from 2006 to 2008, increasing from 0.6% to 1.8%. (Pew Hispanic Center)
- Overall, the ups and downs in the housing market since 1995 have reduced the homeownership gap between whites and all racial and ethnic minority groups. However, a substantial gap persists. As of 2008, 74.9% of whites owned homes, compared with 59.1% of Asians, 48.9% of Hispanics and 47.5% of blacks. (Pew Hispanic Center)
- As of 2007, 68% of all American families owned their own homes. Approximately 47% of African Americans and 50% of Hispanics owned their own home, compared to 75% of White, non-Hispanics. (U.S. Census Bureau)
- Children suffer when their family faces an economic crisis and home loss. Research indicates that children who face home loss are more likely to move from school to school. This school mobility is associated with poor educational outcomes and behavioral problems, and family economic stress is associated with poor health outcomes for children. (First Focus)
- As early as 2000, government agencies found that African-American families living in upper-income neighborhoods were more likely to receive subprime loans than white families living in low income neighborhoods. Neighborhoods formerly subjected to "redlining," where they couldn’t get any loans at all, became the victims of "reverse redlining," where predatory subprime lenders flooded minority neighborhoods with subprime loans. (Americans for Fairness in Lending)
- Read more facts from the Center for Responsible Lending>
Additional Resources
