UPDATE: Foreclosure Exposure II

Released Oct. 23, "Foreclosure Exposure II: The Cost to Our Cities and Neighborhoods" calculates the economic impact the widening foreclosure crisis could have on 96 metropolitan areas if action is not taken immediately to minimize the damage.

The original Sept. 5 “Foreclosure Exposure” study showed that while high-cost and subprime mortgages became more prevalent for all homebuyers over the past decade, minorities - regardless of income – took out a much higher percentage of high-risk loans, particularly Adjustable-Rate-Mortgage (ARM) loans.

ACORN’s 2005 report, “The Impending Rate Shock,” showed that unaffordable loans disproportionately impacted minority and low-income neighborhoods.

Now that rates are ballooning out of the range of affordability, hundreds of thousands of Americans are losing their homes to foreclosure. ARMs worth more than $1 trillion ARMs are expected to reset to higher interest rates in the next few years.

“Foreclosure Exposure: A study of racial and income disparities in home mortgage lending in 172 American cities," uses data available through the annual Home Mortgage Disclosure Act (HMDA) to identify America’s hardest-hit communities. Separate reports are available online with data for each of 172 metro areas.

The study shows that African-American home purchasers were 2.7 times and Latinos were 2.3 more likely to be given a high-cost loan than were whites. For refinances, African Americans were 1.8 times and Latinos were 1.4 times more likely to be given a high-cost loan. Racial disparities persist even among homeowners with similar income levels.

The 10 metropolitan areas most at risk, according to the study, are: Memphis, Tenn.; Springfield, Ill; Birmingham, Ala.; Jackson, Miss.; Detroit and Flint, Mich.; McAllen, El Paso, Brownsville and Laredo, Texas.

In its 10-Point Plan, ACORN calls on lenders and servicers to modify loans, so that they will be affordable to borrowers.  ACORN also calls on state and federal legislators to pass strong anti-predatory lending legislation that would protect consumers from abusive practices without pre-empting local legislation.

ACORN used a sample of 363 lenders that are owned by 19 of the largest lenders in the country. According to industry estimates, these lenders represent 68.5 percent of all residential mortgages originated in 2006 and 50.5 percent of the subprime market.