Raleigh’s African-American and Latino populations have been hit hardest locally by the national foreclosure crisis, according to a report issued by the Center for Responsible Lending.
Homeowners with low and moderate income, as well as neighborhoods with the highest minority populations, also took a hit in Raleigh.
When broken down by race, the white, non-Hispanic population holds a large share of home loans with 66.6 percent, according to the study. Another 12.3 percent of home loans are held by African-Americans, along with 3.5 percent of Latinos and 3.6 percent of Asians.
But despite the fact that they hold fewer loans, the report states that African American and Latino populations in Raleigh have seen the largest percentages of completed foreclosures — 6.1 percent and 4.7 percent, respectively.
The percentage of complete foreclosures for white, non-Hispanic homeowners holds much lower at 2.1 percent.
African-American and Latino homeowners also hold the largest percentage of loans classified as seriously delinquent at 11.4 and 7.7 percent, respectively, while the percentage for white, non-Hispanic homeowners is 3.8 percent and Asian homeowners is 2.9 percent, according to the Center for Responsible Lending.
Raleigh Homeowners, by Percentage
Roberto Quercia, who was involved with the study, said these numbers are consistent with the rest of the country.
Quercia, a professor for city and regional planning at the University of North Carolina, felt that American-American and Latino populations were more affected by the crisis because they were more likely to receive subprime loans with what he calls “bad characteristics.”
Loans with ballooning payments and adjustable rates often cause problems for people later, according to Dennis Harris, housing director at Telmon, a nonprofit organization that provides housing assistance and other services.
Loans were often issued to those who could not afford them, which is why many are in foreclosure now, he said.
“We saw initially, year and a half ago, a lot of loans were made … no documentations were done on the loans,” he said. “In that, as long as [lenders] had a warm body in front of them to get the loan, they made it a few days later. They put a lot of people in the housing market that were not technically qualified.”
Some people were told they could refinance in a few years, Harris said, a dream that disintegrated with the economy.
“A lot of families a few years ago said, ‘I knew I was going to have difficulty making payments anyway,’” he said.
These days, mortgage payment problems seem to stem more from unemployment than poor loan choices, Harris said.
“A lot of these people were in blue collar type jobs and those jobs seem to be the ones affected the most,” he said.
The Center for Responsible Lending study also broke the data down by neighborhoods and income. The percentages of completed foreclosures and seriously delinquent home loans are more than doubled in neighborhoods with the highest minority composition.
Although homeowners with low- and moderate-income levels hold a lower percentage of home loans, they hold a higher percentage of completed foreclosures and loans classified as seriously delinquent, according to the study.
Telmon offers basic financial literacy workshops, classes many lenders required years ago for first-time homebuyers. Harris predicts lenders will require those again in the future.
Quercia said one aspect the study did not look at is whether markets that were viable prior to the crisis fared better than those that were not.
For example, he said, cities like Charlotte and Raleigh, with more stable markets, moved beyond the crisis better than a city like Hickory, where the furniture market was declining.
In boom markets, Quercia said, the patterns reverse.
Quercia believes solutions to the crisis should be tailored to each market.
Sheila Porter, homeownership counselor with DHIC, said regardless of neighborhood, no one should pay more than 32 percent of his or her income for housing.
“You want to avoid getting in over your head,” Porter said. “Keep it at a level of affordability.”
The nonprofit DHIC works to improve housing opportunities in Raleigh. Porter counsels potential homebuyers to prevent foreclosures later.
“From our point of view — our client base is about 75 percent minorities — and we feel pretty good in that after we educate them and give them guidance on how to make good choices and choose good loans,” she said. “Our clients typically are not getting into trouble with their homes. Unless it’s something out of their control like a job loss.”
Porter said a lot of the foreclosures could have been avoided if the buyers had counseling prior to purchase. But if they can’t take a class, her advice: “Be careful of the loan product. Be careful of what you’re signing up for. An adjustable rate mortgage is not something everyone can handle.”
Reporter Sonny Ferares contributed to this article.