Race and Recession: Foreclosure Losses Still Mounting

It has been more than two years since Sandra Hines got shoved out of her family’s home of 38 years, but her loss still feels fresh and raw. She remains proud of her northwest Detroit neighborhood. Its streets are lined with stately trees and dozens of modest brick and concrete houses like the one her family called home for a generation. Today, the two story house sits empty, but through the window a ladder and can of paint can be spotted in the living room — signs that the new owner has been here working.

Hines, now in her mid 50s, looks inside and sees her lost future. “They were going to grow up,” she says of her two nieces, “and this was going to be the house for them, from one generation to another… the one that was going to be passed down in the family.”

Two years ago, Hines, her two sisters and a niece watched as bailiffs came to the house to throw out their belongings and padlock the doors. “I never imagined we’d be in this place,” she told me through tears not long after the foreclosure. “I moved into that house when I was 18 years old. It was our base.”

But the summer of 2007, the Hines took out an adjustable rate refinance loan from H&R Block, to do some repairs on the house. Like millions of other families, when their monthly payment began climbing after just three months, they could no longer keep up. They fell rapidly into default and just days before Christmas they were evicted, becoming one of 2.5 million foreclosures completed between 2007 and 2009. Some analysts predict another 10 to 13 million more will begin the foreclosure process before the crisis ends.

The Applied Research Center, which publishes ColorLines, featured Hines’ story in Race and Recession, a 2009 investigative report on the uneven fallout of the economic downturn. The report finds that the economic crisis is not only impacting communities of color at disproportionate rates, but that the country’s long failure to address systemic racial inequity through public policy eventually threw the whole economy into free fall.

Now, as the country slumps toward completing a third year of this recession, it continues to roll roughshod through communities like the one Hines once called home, where boarded up windows and empty driveways now litter a once vibrant neighborhood. Despite the Obama administration’s foreclosure prevention program, little has changed in either the scale or pace of lost wealth—and community—in places like this. In the ColorLines video above, which was featured on GRITtv this week, Hines revisits her former community and reflects on her own loss.

A recent report from the Center for Responsible Lending found there are almost 6 million homes at imminent risk of foreclosure right now. These are homes where the owners are at least two mortgage payments behind. Goldman Sachs estimates that by 2014, 13 million homes will be gone. And Black, Latino, Asian, Native American and Alaskan Native/Pacific Islander borrowers are all more likely than White borrowers to be at risk of losing their homes immediately. One in five of both Black and Latino homeowners today are at the brink of foreclosure.

In dollars, the losses already tallied will mean that between 2009 and 2012, Black and Latino communities will be drained of $194 and $177 billion, respectively, because of the plummeting home values in the high foreclosure neighborhoods. “This is wealth that would have been passed down, used to pay for college, to use in retirement, to buy a car,” says Keith Ernst, who authored the Center for Responsible Lending report.

In 2009, the White House pushed through its Home Affordable Modification Program, or HAMP, as the president’s signature foreclosure prevention program. Congress rejected reforming bankruptcy law to allow judges to modify home loans and the administration resisted calls for HAMP to include forced reductions of principal balances on loans. Instead, HAMP offered mortgage servicers incentives to reduce struggling borrowers’ monthly mortgage payments to no more 31% of their income by bringing down interest rates and extending the life of the loan.

In March, the administration updated the program to urge loan servicers to adjust principals on homes where the owner owes more than the property is worth and to encourage modifications for unemployed borrowers who are not yet in default.

The program has nonetheless failed by any measure to meet the need, mostly because it remains little more than a subsidy for the servicing industry and fails to make meaningful modifications mandatory. As of May, servicers participating in HAMP had reworked a mere 340,000 mortgages, which amounts to only about a fifth of the homes eligible for a modification under the program.

“At best,” says Ernst, “HAMP might help in the low millions of owners. But when we’re up against the more than 10 million number, that’s not enough.”

Advocates continue to campaign for the administration to force servicers to write down principal balances on underwater loans. More localized movements are pushing for even more. Hines helped start a Michigan group called Moratorium Now. It’s pushing for a total halt on foreclosures in the state for a period of several years—something President Obama supported nationally during his 2008 campaign.

While a moratorium is not a long term fix, “it lets people facing foreclosure get their finances together and figure out what’s going on,” says Hines. Until the principals of underwater homes are adjusted, it might be the only solution.

“It’s easy for people at risk of foreclosure to keep spiraling and spiraling,” adds Wilhelmina Leigh, a senior researcher at the Joint Center for Political and Economic Studies. Three years into that spiral, she says, “We still don’t have the kind of infrastructure we need to help.”

Meanwhile, the recessionary forces are compounding upon one another. Foreclosures stemming from the subprime schemes that swept communities of color have now been largely replaced by foreclosures caused by job losses. “Foreclosures are hitting people who had been doing okay,” explains Leigh, “who hadn’t gotten an adjustable arm and now they’ve lost their jobs.”

The Labor Department’s June jobs report shows unemployment for all Americans remains stuck at just under 10 percent. The number is much higher for Blacks and Latinos, who face 15.4% and 12.4% unemployment respectively. That’s compared to 8.6% for whites. And young people of color, single moms, those in the construction industry and those who were in the lowest income bracket even before the downturn are without jobs at even higher rates. Black teenagers are looking at summer unemployment levels of almost 40 percent.

The jobless have not gotten much good news from Washington recently. Congressional deficit hawks defeated a much needed unemployment benefits extension even though 46 percent of the unemployed have been without work for longer than the normal benefits last. More than a million will now be left without a job or income support.

Sandra Hines urges Chase Bank to help victims of foreclosures at the Chase Bank building in downtown Detroit.

So, community leaders like Hines continue trying to build momentum elsewhere, like here on the streets in Detroit, where last month Hines carried a bullhorn at the front of a crowd of hundreds marching on the Chase Bank building downtown. “Money for jobs, not the banks! Money for education, not the banks! Money for healthcare, not the banks,” she chanted, in a sadly familiar refrain.

Later that day, back at her old home, Hines stood on the porch and, spotting an elderly woman in a driveway across the street, lifted her hand to wave. “Hello Miss James,” she called.

“This has become a real community,” she said.

As she stepped off the porch, a black Dodge truck raced up the road and stopped in front of the house. A man got out and walked quickly over to the lawn.

“What’s going on over here?” he asked. “I’m the owner of this house.”

“I used to live here for 38 years,” Hines replied, staring at the younger man.

“I lived around the corner for 40,” he offered, before wishing Hines well and heading back to the car. Hines called after him to dismiss any tension from the awkward exchange. “Ain’t no problem with trying to check on your property,” she assured her former neighbor. Then she walked next door to say hello to another one-time neighbor, and came out with a few pieces of mail the neighbor had saved for her. “This is where we lived,” she said.