As the one-year anniversary of the Obama administration’s Homeowner Affordability and Stability Plan approaches this week, a new study reveals the damage foreclosures have had on Latino families and recommends government intervention to ease the financial and psychological effects of losing a home, the National Council of La Raza said Tuesday.
"An estimated 1.3 million Latino families will lose their homes to foreclosure between 2009 and 2012. This represents a shocking loss of wealth and a major blow to community stability," said Janet Murguía, the civil rights advocacy organization’s president and CEO, in a statement.
Latinos and blacks were more than twice as likely as whites to be offered a subprime loan and the housing collapse has therefore disproportionately affected these groups, the report said. By 2050, Latinos will make up 30 percent of the population, and immigrants and their children will account for 82 percent of the household growth between now and then, the report added. Therefore, the health of the overall economy depends on how well this population recovers, Murguía said.
"To help the nation recover from the devastation caused by foreclosures, Americans need three things: relief from foreclosures, even if they are out of work; the opportunity for qualified families to purchase newly affordable homes; and stronger consumer protections and accountability standards to prevent future crisis."
The organization and the University of North Carolina at Chapel Hill’s Center for Community Capital conducted the study. They compiled the results of "The Foreclosure Generation: The Long-Term Impact of the Housing Crisis on Latino Children and Families" from interviews with a total of 25 Latino families in Detroit, Mich., Stockton, Calif., Houston, Texas, Tampa, Fla., and Dalton, Ga.
The heads of household for eight families were born in the United States; 11 were born in Mexico, and the rest were born in Colombia, Cuba, El Salvador, Guatemala and Costa Rica. The average number of children in each family was 2.8. Most, 14 out of 25, spoke Spanish exclusively at home and five spoke English exclusively. The rest spoke both at home.
The report called the study "an important first step" in studying the effects of the crisis on families of all backgrounds.
The study found that the most common triggers of default were unemployment and ballooning mortgage payments. In 24 out of 25 families, unemployment, reduced work hours or a business failure led to the eventual foreclosure of the family home.
The unemployment rate for Latinos has been about 13 percent since February 2009, the report said, in contrast to a 10.2 percent rate for the nation as a whole.
Although many families reported asking for help from lenders, none said that lenders offered them "a sustainable forbearance, workout or loan modification," the report said.
Families reported an average $89,155 loss from the foreclosure, and all but one lost their savings, leaving them to wonder how they would send their children to college or pay for retirement.
"Multiple moves and cramped living conditions frequently led to a sense of instability, which, when combined with financial pressure, often led to arguments and resentment among family members," the report said. …CONTINUED
Out of the 25 families, 14 reported discord between partners, 10 considered divorce or separation, and two had already separated at the time of the interviews in July and August 2009. Seven reported more arguments between parents and children (many of whom blamed their parents for the foreclosure) and eight reported more arguments among children.
Families were forced to rely on extended family connections for shelter, day care, transportation and other expenses, straining those relationships. The majority of families, 17, borrowed money from family and friends to make ends meet.
Parents and children reported depression, increased anxiety, tension, guilt and resentment. Children in 18 of the families had academic or behavioral problems at school; 10 sets of children had to change schools due to the foreclosure.
Many families, 15 out of 25, turned to public assistance programs, including unemployment, food assistance and subsidized health care for their children. Several parents reported avoiding medication purchases or trips to the doctor.
The report issued several "stabilizing" recommendations for government intervention in which the administration’s current plan falls short. These included streamlining loan modifications, scaling up existing programs for emergency housing vouchers and conversions of foreclosed properties to affordable rental units, and facilitating options for allowing families to stay in their foreclosed home as renters.
The report also recommended increasing awareness of public programs and benefits available to eligible families by connecting families to benefits through schools and increasing public education to show the face of foreclosure as multigenerational.
It also advocated making more services available by expanding the Department of Housing and Urban Development’s definition of homelessness to include those who are temporarily staying with family members,
The report’s policy recommendations included a credit score amnesty to facilitate families’ economic recovery, creating or enhancing programs for banking and saving that would help families rebuild their credit history, and investing in free, community-based financial counseling and creating a refundable tax credit to subsidize the cost of visiting a certified financial planner.
It also pushed for creating strong protections against "future steering of vulnerable homebuyers into unsustainable mortgages by deceptive lenders," saying such underhanded practices helped create the current housing problems in the first place.
"Policy interventions are clearly needed to stabilize the situations of families and especially children impacted by foreclosure. Moreover, they are needed to help rebuild the assets families lose by no fault of their own," said Roberto Quercia, director of the Center for Community Capital, University of North Carolina at Chapel Hill.
"We encourage policymakers interested in understanding the true cost of foreclosure to look beyond Wall Street and into the faces of the millions of children affected by this crisis."
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