Study Shows Foreclosures in California Disproportionately Affecting Latinos, African Americans

Economic Justice News 08.30,10

Foreclosure rates for Latino and African-American borrowers in California are 2.3 and 1.9 times the rate for non-Hispanic White borrowers, according to a new study by the Center for Responsible Lending (CRL).

Between 2004 and 2008, African Americans (5.7 percent) and Latinos (29.9 percent) received only 35.6% of loans originating in California but accounted for more than half (56.3 percent) of all foreclosures during that period, the study found.


Higher foreclosure rates in California for Latinos and African Americans are accompanied by the fact that these groups were also disproportionately receiving higher interest loans. Again, Latinos and African Americans received only 35.6% of loans originating in California between 2004 and 2008 but accounted for 56.6 percent of higher interest loans such as “subprime” mortgages.  In contrast, during the same period, non-Hispanic White borrowers received 47.7 percent of loans originating in California but only accounted for 31.3 percent of higher interest loans.


Having a clearer understanding of how the foreclosure crisis is affecting various communities is vital, the CRL report notes, since the loss of a home can have “significant” negative effects on a family’s education, health, and employment.


Among the recommendations CRL makes in the study are:



  • Requiring lenders to take additional steps to review homeowners’ applications for loan modifications and providing a means for applicants to correct errors before starting a foreclosure;
  • Expanding the use of principal reduction in loan modification programs, especially in areas with shortages of affordable housing;
  • Allowing bankruptcy judges to order principal reductions on mortgage loans;
  • Increasing funding to expand counselors and legal services to provide assistance to homeowners seeking a loan modification.

The full report, “Dreams Deferred: Impacts and Characteristics of the California Foreclosure Crisis,” is available online at www.responsiblelending.org.