The Latino Community is Being Hit Very Hard by Foreclosures
On June 20, 2008 National Public Radio ran a story on the impact of the foreclosure crisis on the Latino community. We've written about foreclosures several times over the last few months, but this story taught me more about how the situation effects both individual homeowners as well as the community (and the economy) as a whole.
Foreclosures have jumped 50% in the last year. According to the Center for Responsible Lending 50% of subprime loans were made to Latinos in 2006. With new estimates suggesting that 30-40% of all subprime loans end up in foreclosure, we can easily understand the concerns in the Latino community. NPR tells us the story of Maria Cruz, a homeowner in Maryland. Maria works full-time as a housekeeper and raises her son who loves to plant roses in their garden. Maria is like all of us who wanted a piece of the American Dream. When asked about her situation she tells reporters that her "dream is all gone now."
The report goes on to describe how the destabilization of home prices results in a lower tax base that supports schools, law enforcement, and other local resources. Families have less money to spend at local business as they try to save every penny for the housing costs. The impact on the community is tremendous. Until there is a turn-around in the housing market, the rest of the economy will suffer. We need to come together as a community to do something about it. Families like Maria's will continue to be at-risk as adjustable mortgages reset. We owe it to ourselves and each other to form a united front.
I encourage you to listen to the 7 minute-long story. I found it illuminating and inspiring. What do you think? What does this mean for your community?
Thanks for blogging on this issue!
Liz,
I really appreciate your post on this issue, and your encouragement to listen to this NPR story. Although the foreclosure crisis is a general tragedy, foreclosures within the Latino community are presenting in pandemic proportions.
The abuse of flexible lending products is the main cause of the crisis. Nevertheless, these abusive practices had the opportunity to flourish in the Latino community because of our culture. Latinos thrive on informal networks, and we count on each other's referrals and advise when making decisions. Some realtors and mortgage brokers preyed on the power of these informal networks to push their products and services employing all sorts of unethical practices. They were selling the American Dream by way of cunning and deceit.
There are many disastrous consecuences to foreclosed homeowners and to the community at large, and I'd like to add the tightening of underwriting methods to the list of unfortunate outcomes. As underwriting guidelines get more restrictive, the ability to borrow is greatly reduced. This jeopardizes not only prospective homebuyers, but people already at risk of foreclosure in need of refinancing.
This is of particular concern to the Latino community, because many Latinos are self-employed, have little or no credit history, hold multiple jobs, are unbanked, etc. This financial profile makes it difficult for them to borrow using many conventional loan products. Thus, as lending institutions revise underwriting policies, homeonership is closer to impossible.
The implementation of a recipe of flexible lending products and underwriting guidelines, community-based homeownership counseling, and tighter ombudsman systems for real estate and mortgage professionals (that are customer-friendly) may help Latinos emerge from this crisis still hopeful of the American Dream.
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