Minorities Hardest Hit by Foreclosure Crisis

The Center for Responsible Lending recently released a report indicating that African-Americans and Latinos have been hit harder by the mortgage crisis than their Caucasian counterparts. The study was released on Friday and the findings were based on reviews of mortgage loans secured through 2005 and 2008. The statistics reveled that a total of 8 percent of African-American and Latino borrowers lost their homes due to foreclosure. Those numbers are substantially higher than the 4.5 percent foreclosure rate of homes owned by non-Hispanic whites.

The heavy portion of subprime loans given to minority homeowners most likely caused the trouble. Minorities are 30 percent more likely to qualify for subprime loans as compared with Caucasian mortgage holders with similar degrees of risk. Interest rates are higher on subprime loans as the borrowers are categorized as higher risk based on their credit history, employment status and liquid assets.

The study estimated that steep value declines in minority owned housing are looming on the horizon. The Center for Responsible Lending believe that declining market values from 2009-2012 will cause a $373 billion decrease to home values in both African-American and Latino communities. This will be possible as already as 17 percent of Latino homeowners either have already lost their homes are on the verge of defaulting on their loan. The African-American community has an 11 percent rate while only 7 percent of non-Hispanic whites are in a similar position.

The disparity between the foreclosure rates has nothing to do with income. Sadly even minorities with the largest incomes are still 81 percent and 94 percent more likely to lose their homes than their white neighbors. The default rate is being blamed on a bad combination of unaccountable lenders and irresponsible borrowers.

The new Financial Reform bill is being put in affect to help better control the lending industry that prayed on unsuspecting borrowers. Those interested in purchasing their own home cannot rely on a mortgage provider to look after their best interest. Potential homebuyers need to take the time to build a budget to determine if they have the financial chops required of homeowners. If crunching the numbers proves that you have the financial means to secure a mortgage, a 30-year fixed rate option is an excellent option.

Fixed rate mortgages are considered to be the safest type of mortgage agreement currently available, and there are plenty of places where consumers can find their best mortgage offer.