Five years in, the nation is less than halfway through its foreclosure crisis, the nonpartisan Center for Responsible Lending warned in a report released Thursday.
"For people that think we're out of the woods, they need to kind of rethink that premise," said Roberto Quercia, director of the Center for Community Capital at the University of North Carolina at Chapel Hill and one of the study's authors.
Roughly 42.2 million Americans took out a mortgage loan between 2004 and 2008. By February of this year, 2.7 million of those households, or 6.4 percent, had lost their home to foreclosure. CRL estimates that an additional 3.6 million households, or 8.3 percent, are at "immediate, serious risk" of losing their homes.
And that estimate is probably lowballing the problem, the researchers said: CRL's research only extends through February 2011, and it excludes both loans originated outside the given time-frame and loans that are not yet seriously delinquent.
What exactly is pushing homeowners to the brink? Researchers found the type of mortgage a borrower has can have a greater impact on the borrower's ability to stay in their home than even income or credit history.
This trend has had particularly adverse affects for minority homeowners. Higher-income Latinos are three times more likely to lose their homes to foreclosure than their white counterparts, according to the report. Similarly, higher-income African Americans have foreclosure rates twice that of higher-income white borrowers. In low-income communities, minority foreclosure rates also eclipse those of white borrowers.
What separated the minority borrowers from their white counterparts is the type of mortgages they were sold, the researchers concluded. Minority borrowers have a disproportionately large percentage of risky subprime loans, the mortgages infamous for their high interest rates and problematic payment options. African American and Latino borrowers with good credit histories -- a credit score of at least 660 -- are three times more likely than white borrowers to end up in a high interest rate mortgage, the report found.
"It's industry which has painted this picture of 'oh, it's the borrower's fault,' that the homeowner is behind on mortgage payments," said CRL spokeswoman Kathleen Day. "But they do that to deflect attention from the unbelievably irresponsible lending they were doing."
Researchers also discovered that the type of person most likely to lose their home to foreclosure changes depending on geography. In cities and states where property values were high prior to the collapse of the housing bubble -- including many parts of California, Florida and Arizona -- it is wealthier homeowners who have the highest foreclosure rates. In communities where real estate prices remained relatively low before the market collapsed -- such as Detroit, Cleveland and St. Louis -- it is the lower-income borrowers who are fighting to keep their homes.
"The story in Michigan is different than the story in Florida," said Quercia. "In Michigan, in the run up to the bust, there was very high unemployment and people were given loans to take equity from their homes to make ends meet. In Florida, where there was very low unemployment prior to the crisis, mortgages were used to increase the affordability of the home."
The idea that the national foreclosure crisis is a collection of local foreclosure crises suggests that any solution to the slump needs to be tailored to local situations, Quercia said. And customized remedies are especially important in minority neighborhoods that have been hardest hit by the crisis."The idea of letting the market fix itself won't really work because these communities of color will be so heavily impacted," says Quercia. "In many lenders' minds, these neighborhoods have a reputation as high risk areas because of all the foreclosures, so it will take a very proactive approach to rebuild them."