Today the Federal Reserve Board issued a bulletin with its preliminary report on 2006 data reported under the Home Mortgage Disclosure Act (HMDA). We have not yet conducted a full analysis of the Board's report, but an initial review finds that, once again, African American and Latino families receive a disproportionate share of higher-cost, subprime home loans.
"Higher-cost" loans have propelled the current foreclosure crisis, which has revealed that lenders have made subprime loans far too often with reckless disregard for affordability, while packing these loans with exploding adjustable interest rates, prepayment penalties, and other features that have been demonstrated to increase the risk of defaults. The result: the growing wave of foreclosures in the subprime market that now has the potential to pose the greatest threat to African American and Latino wealth in American history.
As shown below, the data released by the Fed today show that a majority of African-American homeowners last year received a higher-rate loan. Latino families didn't fare much better. As shown below, this contrasts sharply with white non-Hispanic families, of whom slightly less than 22% received high-cost loans.
2006 HMDA Results – Share of High-Cost Loans (purchase and refinance)
| White Non-Hispanic: | 21.9% |
| White Hispanic: | 42.3% |
| African-American: | 53.2% |
CRL has published research showing that, on our current course, more than 2.2 million homeowners with subprime loans will lose their home to foreclosure when all is said and done. We hope that legislation soon to be introduced in the U.S. House and Senate will create a needed change in the bankruptcy code to help more than 600,000 families stave off foreclosure and thereby save neighbors not facing foreclosure $72.5 billion in wealth.
To find out more about policies recommended by CRL, see our August 15 comment to the Federal Reserve Board.
For more information: Kathleen Day at(202) 349-1871 or kathleen.day@responsiblelending.org; Sharon Reuss at (919) 313-8527 or sharon.reuss@responsiblelending.org; or Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org.