Foreclosure: Dismantling Family Ties

by Janis Bowdler

A recent study authored by National Council of La Raza (NCLR) and the Center for Community Capital at the University of North Carolina found that family bonds were profoundly distressed after experiencing foreclosure. We are deeply concerned about what will come of this foreclosure generation and what it means for the nation if families continue to lose their homes. The following is the story of the Nogales family.

On the west coast of Florida, the Nogales family has been split up by foreclosure. Ms. Nogales, a single mother who has a 17-year-old daughter and two sons, ages 18 and 25, experienced a loss in income that triggered a series of events ending in foreclosure.

“First, it was a loss of income. Second, my mortgage loan actually increased because of taxes, which, of course, put me behind because with my less income and my mortgage [going] up, I was not able to pay it, the adjustable loan. I had homeowner’s [association] dues, too, and they all went up.”

Foreclosure triggered contention between the family members. Faced with eviction, the mother moved into her sister’s home. However, the home was too small to accommodate her two older boys, so they were forced to move out on their own with little warning and before they were financially prepared to do so. This separation created conflict, anxiety, and feelings of guilt. Ms. Nogales describes the tension:

“Well, for one thing, I think my boys are jealous because I’m providing for [my daughter] and not helping them out. So of course they’re jealous… My daughter and I have moved in with my sister, which I never thought I would ever have to do. Never thought I would be living with my sister at this age. One of the boys comes and stays periodically with me and with a friend and the other one stays with a friend.”

She goes on to express concerns about her son’s anger:

“My 18-year-old has been in trouble with fighting… But not with the other son, with other people…He has a lot of anger.”

The foreclosure has hindered her daughter’s education and emotional state. After the family lost their car due to financial difficulties, her daughter had no other means to get to school. She was forced to transfer to an online program to complete high school. Removed from her friends and social network, the daughter became withdrawn and depressed.

Ms. Nogales’ extended family used to help each other during hard times. Unfortunately, the entire family is now struggling financially.

“My parents are still here and their house actually is in the process of probably going into foreclosure. So it could end up where about seven of us are all living in one place and, of course, we won’t even know where that is yet, depending on the house with my sister. Ours is like a domino effect. It’s like one went into foreclosure, then another one, because we’re all trying to help each other financially. But we’re having to not pay this to help pay that to keep this house and it just gets — it worked for a little while. It’s not working anymore.”

Ms. Nogales is concerned about the extinction of the American Dream. She worries about how this economic crisis promises a very difficult start for the next generation entering the workforce and the housing market.

“I think my kids are just finally looking at it going, ‘Oh, my gosh. We thought we were going to have [the American Dream].’ I mean they’re seeing [the dream vanish], too. They’re seeing me struggle.
I don’t think [the American Dream] is available and likely to happen for a lot of people. I feel bad for these people that come out of college. My kids are going to be going into college, hopefully. I don’t know what kind of future they’re going to have with being able to come out of school. I feel scared for them and sorry for them for what the next 10 years are going to be like for our youth.”

Unfortunately, many more families will suffer this way before the foreclosure crisis subsides. In fact, 1.3 million Latino families are expected to lose their homes between 2009 and 2012. The Nogales family’s story is just one among millions. By sharing their story, we hope to give a face to a crisis often glossed over by complicated economic theories and staggering statistics.

Inheriting Foreclosure

by Janis Bowdler

Approximately 1.3 million Latino homeowners are expected to lose their homes to foreclosure between 2009 and 2012. As many as eight million Americans were behind on their mortgage payments last year. With numbers this large, it's easy to lose sight of their full meaning. However, when the National Council of La Raza (NCLR) and the Center for Community Capital (CCC) partnered to take an in-depth look into families' fractured households, we saw just how devastating the crisis has become.

NCLR and CCC followed the stories of 25 parents and children who had experienced foreclosure. We found that foreclosures create a perfect storm where a number of issues known to be bad for kids collide under one roof. Interviews with affected families showed that children of foreclosure were at high risk of becoming children of divorce and declining grades. Parents' relationships with their children are frequently mired in guilt and anxiety.

With their emergency reserves zapped and home equity gone, many of those interviewed were forced to alter their long-term financial game plan. They are unlikely to contribute to their children's future financial stability in ways parents usually want to, such as helping with a home or car purchase or college bills. The retirement horizon is no longer visible for many. Some are even putting off medical care to save money. These families have become the foreclosure generation.

Today, NCLR and CCC released their findings in the report, The Foreclosure Generation: The Long-Term Impact of the Housing Crisis on Latino Children and Families, which examines how families will fare after losing their home and financial security. Many will be driven off the path to prosperity that they have worked so hard to stay on. The subprime lending and housing crises are expected to result in the loss of as much as $98 billion in collective Latino household wealth, a devastating figure given that Latinos and their children will be a major force in the growth of U.S. population over the next few decades. Read more about the report from The Washington Post here.

NCLR and CCC released their report today to mark the one-year anniversary of the Home Affordable Stability Plan's launch. We hope these findings can impress on the administration and Congress just how important a bold response is to coping with the crisis. It demands decisive steps that prevent further erosion of familial, social, and financial stability in communities throughout the country.

More Than Two Years into the Foreclosure Crisis, Homeowners Are Faced With the Good, the Bad, and the Ugly

By Janis Bowdler

In his State of the Union address, President Obama said, "It's time to get serious about fixing the problems that are hampering our growth. One place to start is financial reform." While we wholeheartedly agree, financial reform is only one piece of the puzzle needed to move us beyond the foreclosure crisis and return us to a place where homeownership serves as a stepping stone to financial security. An estimated 1.3 million Latino families will lose their homes to foreclosure between 2009 and 2012. This represents a shocking loss of wealth and a major blow to community stability. To prevent these statistics from becoming reality, Americans need three things: a way to save their home even if they're out of work, opportunities for credit-worthy families to buy a home, and additional accountability measures to ensure that we never face this kind of crisis again.
The president only mentioned one of the three key elements of resuscitating the fragile housing market. As we forge ahead with strained hope, we reflect on how gridlocked politics and a damaged economy stifled progress on these core aspects of recovery and left us with the good, the bad, and the ugly.
The Good
In the wake of the bursting housing bubble, the flow of credit―once a rushing river―has slowed to a trickle at best. Had the Federal Housing Administration (FHA) not stepped in to keep mortgage credit available, eligible homebuyers would likely have been unable to seize low interest rates and homeownership opportunities in the newly affordable market. Last year, 50% of Latinos who purchased a home did so with FHA-backed financing.

Responding to concerns from the National Council of La Raza (NCLR) and others, the Department of the Treasury just this week released welcome changes to streamline loan modifications under the Making Home Affordable (MHA) program-the most important of which is making it easier for families to convert their trial modifications into permanent modifications.
The Bad
The public outcry for a new era of accountability, transparency, and responsibility within our banking system was heard by some while ignored by others. In the face of fierce industry opposition and untold sums of campaign contributions, the House passed legislation that would go a long way to curb some of the worst industry practices. While not perfect, it's further than the Senate has gotten, where consumer protections are rumored to be on the chopping block. Without this legislation, consumers will lose their chance to have an essential defense against lenders' deceptive behavior.

While NCLR applauds the administration for its ongoing efforts to improve MHA, design flaws were evident early on. Since the program's launch, thousands of families have been stalled in loan servicing purgatory, waiting to hear whether they will receive a loan modification or suffer the fate of many others and lose their homes.
The Ugly
Hope for Homeowners was designed to offer as much as300 billion in government-guaranteed home loans to borrowers whose current mortgages exceed the value of their houses. Thus far, the program has reached a mere 96 households―a far cry from the original goal of helping 400,000 underwater homeowners.

There has been little federal action to protect struggling families against foreclosure rescue scams. Many families are feeling increasingly desperate as foreclosure programs continue to lag, making these ubiquitous offers seem even more attractive. Scammers convince families to sink their last dollars, as much as8,000, into fees for services that either were never completed or resulted in unaffordable and unsustainable mortgage payments.

Unemployment in Latino and Black communities has been hovering around 13% for the last year, three percentage points higher than the national average. While the nation's workers search for their next paycheck, millions are also scrambling to pay for their mortgage. Without an income, families in need will not qualify for MHA-a problem that will likely mushroom as savings and unemployment benefits are exhausted.
A rocky path for recovery lies ahead. While there are rays of light in the administration's vision for 2010, the nation is cautious. Decision-makers have fallen short in delivering our families from the ongoing effects of the economic meltdown. Congress and the administration cannot stop with the vision of reform set forth by President Obama last night but must finish the work they started on preventing foreclosures and stabilizing communities. Truly, our families have not a minute to spare.