DS News - Digital Archives

RESEARCHERS FIND FORECLOSURES COMPLETED FORECLOSURES COST NEARLY $2 TRILLION IN DOWN 31% FROM HOME EQUITY Foreclosures have drained nearly $2 trillion in home equity from neighborhoods across the United States, according to a report from the Center for Responsible Lending (CRL). In "Collateral Damage: The Spillover Costs of Foreclosures," researchers Debbie Bocian, Wei Li, and Peter Smith conclude that, based on the 10.9 million loans that entered foreclosure between 2007 and 2011, approximately $1.95 trillion in property value has been lost or will be lost by residents who live close to foreclosed properties. This estimate includes losses stemming from completed foreclosures and future losses projected on foreclosure starts. The researchers noted the estimated cost does not include the total loss in home equity resulting from the foreclosure crisis (estimated at $7 trillion) and also does not take into account the equity lost by those families who lose their homes to foreclosure. In addition, the report doesn't cover "the billions of dollars drained from communities as a result of lost tax revenue, vacant properties, increased crime, and lower school performance by children," according to their paper. Communities of color are seeing the greatest share of the $2 trillion loss, with more than half of the home equity drain impacting minority neighborhoods. The average spillover cost per family is or will be $21,000 in household wealth, or 7 percent of median home value, according to CRL's researchers. However, in minority neighborhoods, the average loss is or will be $37,000, or 13 percent of home value. Wade Henderson, president and CEO of the Leadership Conference on Civil and Human Rights, called the report "troubling evidence of how much the economic costs of foreclosures are spilling over into communities all over America." He also said the increased cost to minorities comes at the hands of abusive lending and servicing behavior. "Communities of color—which have been targeted for years by predatory lenders, and abused for years by mortgage servicers—have been practically drowning," Henderson said. "Until policymakers get serious about reducing foreclosures and restoring meaningful homeownership in all communities, a full economic recovery will likely remain out of reach." Janet Murguia, president and CEO of the National Council of La Raza, echoed the sentiment. "The wealth drain triggered by foreclosures is continuing unabated, hurting Latino families and other vulnerable communities the hardest," Murguia said. "We're calling on policymakers to show strong leadership in stopping the foreclosure crisis and making fair and sustainable housing a national priority." REPORT: GSES MISS MARK FOR LOWINCOME HOME PURCHASE GOALS Fannie Mae and Freddie Mac were shy of meeting their low-income and very low-income home purchase goals, according to the Federal Housing Finance Agency's (FHFA) annual housing report. Currently, the GSEs, the Federal Housing Administration, and the Department of Veterans Affairs—all government agencies— serve as the principal sources of liquidity in the mortgage market. While the GSEs remain in conservatorship, "FHFA expects them to continue to fulfill the purposes for which they were established, including support for affordable housing as measured by the housing goals," the agency said. For the 2011 calendar year, Fannie Mae 38 and Freddie Mac exceeded their low-income refinance and multifamily goals but did not meet their low-income and very low-income home purchase goals. FHFA set a benchmark of 21 percent for low-income refinances. Fannie Mae recorded 23.1 percent, and Freddie Mac recorded 23.4 percent. The low-income home purchase benchmark for the year was 27 percent. Fannie Mae posted 25.8 percent while Freddie Mac posted 23.3 percent. FHFA's benchmark for very low-income home purchases was much smaller—8 percent— but both GSEs fell short of this goal as well. Fannie Mae was closest at 7.6 percent while Freddie Mac was further behind at 6.6 percent. LAST YEAR Completed foreclosures continued their descent in September, falling 31 percent from a year earlier, according to data from CoreLogic. The analytics company reported the number of homes lost to foreclosure in September dropped to 57,000, a steep drop from 83,000 in September 2011 and down slightly from the upwardly revised 59,000 in August. In addition to the monthly and yearly declines, Mark Fleming, chief economist for CoreLogic, said completed foreclosures are also down 50 percent since the peak month in September 2010 and are 22 percent less than the beginning of this year. Before the housing crisis, completed foreclosures were much lower than the sinking figures reported recently. Between 2000 and 2006, completed foreclosures averaged 21,000 per month. "While there is significant progress to be made before returning to pre-crisis levels, the trend is in the right direction as short sales, up 27 percent year-over-year in August, continue to gain popularity," Fleming said. Foreclosure inventory is also depleting, with the number of homes in foreclosure falling to 1.4 million, or 3.3 percent of all homes with a mortgage, in September. Mortgaged homes in any stage of the foreclosure process are counted as foreclosure inventory. A year earlier, approximately 1.5 million homes, or 3.5 percent of homes with a mortgage, were counted as part of the foreclosure inventory. Month-over-month foreclosure inventory levels dropped 1.1 percent. "The continuing downward trend in foreclosures along with a gradual clearing of the shadow inventory are signs of stabilization and improvement in the housing market," said Anand Nallathambi, president and CEO of CoreLogic. "Increasingly improving market conditions and industry and government policy are allowing distressed homeowners to pursue refinancing, loan modifications, or short sales rather than foreclosures." STAT INSIGHT 317,063 Short sales completed in first nine months of 2012. Source: HOPE NOW Alliance

• Cover