Hispanic families are faring the worst during the current economic meltdown. According to a recent study released by the Pew Research Center, Latinos experienced the single largest decline in wealth of any other group. This development could severely alter the economic future of our nation as Hispanics will constitute more than a quarter of the U.S. population by 2050.
The destruction of the housing market has set the upward mobility of the Latino community back by a generation or more. A home is the largest and most significant asset for most Americans, and homeownership was supposed to help our families save for retirement or send their children to college. Once stripped of this main asset, a great many Latinos and their children will struggle to join the middle class. Absent smart intervention, these families will take decades to recover from the financial blow.
While many Americans have felt the harsh consequences of the housing crisis, the median wealth of Hispanic households fell by 66% from 2005 to 2009. By comparison, the median wealth of Whites fell by 16% over the same period. White wealth now outpaces that among Latinos by a staggering $18 to one. Unfortunately, much of the collective damage from the housing crisis was avoidable. Deceptive lenders looking for a quick profit actively pushed borrowers of color, as well as women, the elderly, and other underserved population segments, into needlessly risky, expensive mortgages. In fact, Latinos were 30% more likely than Whites to receive high-cost loans when buying their homes, despite qualifying for standard prime loans.
The inaction of regulators in the years leading up to the housing market crash should serve as a cautionary tale for today. More than three years in to the crisis, families are still losing their homes at a record clip. The best way to stop housing values from plummeting further―and stabilize household balance sheets―is by keeping families in their homes.
There are realistic solutions that we have yet to explore fully. For example, mortgage giants Fannie Mae and Freddie Mac owned or guaranteed roughly half of all outstanding mortgages in the United States in 2010 (including a significant portion of subprime mortgages) and they financed 63% of new mortgages that originated in that year. Their policies set the market, yet they have refused to implement basic foreclosure best practices, such as ensuring that a family is not foreclosed on at the same time the servicer is verifying their eligibility for a modification. The National Council of La Raza (NCLR) is urging Fannie and Freddie to join the U.S. Departments of the Treasury and Housing and Urban Development (HUD) in extending 12 months of forbearance under HAMP (Home Affordable Modification Program) for unemployed homeowners. Without participation from Fannie Mae and Freddie Mac, the Obama administration's foreclosure prevention programs will not reach many of the families that most need assistance.
We cannot afford to overlook the racial wealth gap or its consequences for our nation's economy. If we act now, we can stop the bleeding in the housing market and concentrate on economic recovery for the hardest hit―the unemployed workers and vets, retirees, and communities of color. We have certainly not exhausted our options. Our leaders know it and we know it. The White House is already beginning to see that we should use more creativity in devising solutions to repair the housing market for all families. This fresh outlook must translate into action to bring about the systemic change this country truly needs.
This post was originally posted to the NCLR Blog.