Negative equity is disproportionately concentrated in the Chicago region’s communities of color, Woodstock Institute report shows
Homeowners with mortgages in African American communities more than twice as likely to be underwater as homeowners in white communities
CHICAGO–Negative equity is disproportionately concentrated in the Chicago region’s African American, Latino, and majority minority neighborhoods, a new report from Woodstock Institute found. The report also found that borrowers in communities of color have much less equity on average than do borrowers in predominantly white communities.
View the full report here: http://bit.ly/strugglingtostayafloat
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The report, “Struggling to Stay Afloat: Negative Equity in Communities of Color in the Chicago Six County Region,” used data from a major provider of mortgage and home value data to examine patterns of underwater homes in communities of various racial and ethnic compositions in the Chicago six county region in 2011. It found that:
- Nearly one in four residential properties in the Chicago six county region is underwater, with just under $25 billion of negative equity. The average underwater property has 31.8 percent more outstanding mortgage debt than the property is worth.
- Borrowers in communities of color are much more likely to be underwater than are borrowers in white communities.
- Borrowers in communities of color are more than twice as likely as are borrowers in white communities to have little to no equity in their homes. In highly African American communities in the Chicago six county region, 40.5 percent of borrowers are underwater, while another 5.4 percent are nearly underwater. Similarly, 40.3 percent of properties are underwater in predominantly Latino communities and 5.3 percent are nearly underwater. In contrast, only 16.7 percent of properties in predominantly white communities are underwater, with another 4.4 percent nearly underwater.
- Almost three times as many properties in communities of color are severely underwater compared to properties in white communities. In predominantly African American communities, 30.1 percent of properties have loan-to-value (LTV) ratios—a comparison of outstanding mortgage debt to home value—exceeding 110 percent, while that figure is 30 percent in predominantly Latino communities. In contrast, just 10.1 percent of the properties in predominantly white communities have LTVs exceeding 110 percent.
- Borrowers in communities of color have much less equity in their homes than do borrowers in white communities, resulting in a significant wealth gap.
- Only about one-third of homeowners in communities of color have significant equity in their homes. In predominantly African American communities, 34.5 percent of borrowers have more than 25 percent equity in their homes, while 33.1 percent of borrowers in Latino communities have more than 25 percent equity in their homes. Fifty-five percent of borrowers in predominantly white communities have more than 25 percent equity.
- Borrowers in communities of color have much higher average loan-to-value ratios than do borrowers in predominantly white communities. The average LTV ratio is 92.1 in predominantly African American communities and 87.4 in Latino communities, compared with an average LTV ratio of 67.7 in predominantly white communities.
Negative equity contributes to community decline by potentially leading to increased foreclosure activity, threatening the success of foreclosure prevention programs, and draining neighborhood wealth. In addition, the destruction of assets caused by negative home equity may disproportionately threaten the economic security of people of color because home equity is a larger proportion of their net worth than it is for white people.
View the full report here: http://bit.ly/strugglingtostayafloat
The report concluded with a number of policy recommendations to reduce the negative impacts of concentrated negative equity, including:
- Servicers should use principal reduction as a foreclosure prevention tool more broadly.
- The Federal Housing Finance Authority should permit loans backed by Fannie Mae and Freddie Mac to be eligible for principal reductions.
- Servicers should streamline processes for short sales.
Tom Feltner | Vice President
29 E Madison Suite 1710 | Chicago, Illinois 60602
T 312/368-0310 x2028 | F 312/368-0316 | M 312/927-0391
- A good credit score did not protect Latino and black borrowers (scoppcanton.wordpress.com)
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- Housing Still Drowning in Underwater Mortgages (blogs.wsj.com)
WASHINGTON, D.C. — In an effort to dramatically boost public/private partnerships and philanthropic support for strong community development plans across the country, the Department of Housing & Urban Development unveiled a new web feature to spotlight grantee and top-tier applicant efforts to create opportunity and revitalize regions, communities and neighborhoods around the country.
Featured at hud.gov, the web tool displays contact information, partnerships, maps and funders for the most robust proposals to HUD’s flagship community development initiatives, allowing users to easily find and support local transformation efforts.
“We know that there is an unfulfilled demand in this country for healthy, livable, and prosperous neighborhoods. HUD is committed to transforming how we approach community redevelopment to meet those needs,” said HUD Assistant Secretary Raphael Bostic. “Instead of applying a one-size-fits-all design, for the first time, we’re seeking to lift up solutions developed at the local level that respond to local needs. This web tool will help the strongest applicants from across HUD’s programs to connect with philanthropic partners — private foundations, corporations, and family and community foundations — and explore ways to leverage federal investment to increase impact in their neighborhoods.”
“Now more than ever, smart community development efforts require government, business, and foundations to combine their resources,” said Mimi Corcoran, director of the Special Fund for Poverty Alleviation at the Open Society Foundations. “HUD’s new web tool facilitates these partnerships, helping people revitalize their neighborhoods across the country.”
The first applicants to be featured on http://Partner.HUD.gov come from HUD’s Choice Neighborhoods Initiative — a centerpiece of the Obama administration’s interagency Neighborhood Revitalization Initiative. The partnership includes HUD , Education, Justice, Treasury and Health and Human Services and supports local leaders from the public and private sectors as they attract the private investment needed to transform distressed neighborhoods into sustainable, mixed-income neighborhoods with the affordable housing, safe streets and good schools every family needs. As part of the Administration’s commitment to a more transparent grant process, later updates will include information on high-scoring applications from HUD’s Sustainable Communities initiative and other programs to deepen the partnerships at the local level.
In 2011 HUD awarded more than $129 million in Choice Neighborhoods funding to 22 communities preparing to take on this work. To date, the grantees have obtained a combined $7.3 million dollars in leveraged funding — nearly double their total grant award – as stakeholder partners committed their resources to planning the transformation of their neighborhoods. HUD’s first Choice Neighborhoods Implementation Grants — awarded to Chicago, Boston, New Orleans, San Francisco and Seattle — received a combined $122 million in late August to redevelop distressed housing and bring comprehensive neighborhood revitalization to blighted areas. Thosegrantees have leveraged a additional $1.6 billion — more than 13 times their total grant award — including refocused and streamlined funds from private investors, cities, universities, and a range of local partners.
However, because Choice Neighborhoods is a competitive grant program, strong demand has outpaced available funding. HUD received more than 150 applications from public, private and nonprofit sponsors in 31 states and the District of Columbia. Due to the limited amount of funding, HUD was able to issue only five of implementation grants, and 17 smaller planning grants — leaving several strong applications that HUD was simply not able to fund and many more grantees eager to attract additional resources to their transformation plans.
In response, HUD is publishing, for the first time, comprehensive information about grantees and qualified applicants on an innovative online platform. The web-based tool includes winners of the first Choice Neighborhoods Planning and Implementation awards as well as high scoring runners-up from those competitions.
The http://Partner.HUD.gov web feature is intended to provide information funders and other local stakeholders can use to propel applications that HUD deemed promising, but was unable to fund. It will also offer communities greater access to work happening around the country and best-practice models that might help shape their efforts.
- HUD gives Chicago $30.5M for development (marketwatch.com)
- Twenty Years Later, Living Cities, A Historical Accomplishment (scoppcanton.wordpress.com)
- HUD Awards Bring “Bittersweet” End to Sustainability Program (streetsblog.org)