The Center for Responsible Lending also looked at the types of homes that were foreclosed. Contrary to popular belief, the homes that went on the market were not the “McMansions” type built in lavish subdivisions. In fact, 75% of those foreclosed properties can be described as ‘modest’.
Why were more Latino homes closed then? The report also delved into this.
Higher cost sub-prime mortgages were most likely to be granted to Latinos and African-Americans. Both also enjoy loan terms that increase risk of default. White borrowers, on the other hand, only safer loans are granted them.
A Wall Street Journal in-depth report in 2010 looked at Latino home ownership and revealed another reason as to why they have the highest cases of foreclosures. According to numbers from US Census Bureau, Hispanic home ownership grew to 47% in the years 2000 to 2007 even though national numbers were only up by 8% in the same period. In 2005 alone, says the Federal Financial Institutions Examination Council, mortgages given to Hispanics increased by 29% and the expensive non-prime mortgages soared at 169%.
Low-income housing groups and Hispanic lawmakers all pushed for higher home-ownership among Latinos. And this may well be the reason behind the booming mortgages granted the Hispanics. Recent events show that this enthusiasm over the American dream seems to be failing.
In its report, the Center for Responsible Lending also offered solutions to the problem at hand. Bankruptcy judges should no longer be banned from modifying principal residential mortgages. Funding for agencies that offer legal help to borrowers and housing counseling should also be increased.
