The Foreclosure Crisis and Its Impact on Communities of Color: Research and Solutions

As the foreclosure crisis continues unabated, destroying wealth for American families and undermining the stability and vibrancy of communities, the National Community Reinvestment Coalition's (NCRC) latest whitepaper serves as an in-depth investigation of the success and weaknesses of the major federal and private foreclosure prevention efforts. The paper also examines proposed solutions to rebuild the homeownership markets. This extensive body of research has a particular focus on the impacts of the foreclosure crisis on people and communities of color. Read the whitepaper online.

Download the white paper

The Impact of the Proposed Qualified Residential Mortgage Definition on Home Opportunity in America

Financial institutions will be exempt from the 5 percent risk retention requirement on certain types of mortgages, known as Qualified Residential Mortgages (QRMs). QRMs contain loan terms and practices that the regulatory agencies have determined are less likely to end up in default. The regulatory agencies have appropriately specified a series of risky loan terms and practices that cannot be in QRMs such as prepayment penalties and a lack documentation of borrower income. However, the agencies have proposed down payment requirements of up to 20 percent for QRMs. This requirement will effectively disqualify large numbers of moderate- and middle-income families from buying homes. The proposed guidelines for debt-to-income ratios are also unduly restrictive and will shut out broad segments of the population.

There's no good reason to require high downpayments. This analysis also reveals that foreclosure rates do not differ substantially between the proposed QRM definition and the alternative definitions. In 2006, for example, QRM loans had a foreclosure rate of .14 percent, but the same loans with down payments as low as 3 percent had a foreclosure rate only inches up to .26 percent. This tiny rate of foreclosure compares to subprime loans that had default rates of over 50%. Read the white paper online.

Download the white paper

Analysis of the Obama Administration's Housing Finance Proposals (1.45mb)

NCRC released its latest report: “Rebuilding Communities in Economic Distress: Local Strategies to Sustain Homeownership, Reclaim Vacant Properties, and Promote Community-Based Employment.” This report will be of interest to local community, housing and economic development entities and their stakeholders, as well as to policy makers at every level looking to replicate best practices in community rebuilding.

This document highlights innovative responses that state and local governments, community-based organizations, financial institutions, and other stakeholders have developed to stabilize their communities, despite a limited access to resources. In addition, a list of best practices is presented as a menu of strategies that stakeholders can incorporate into their redevelopment plans to achieve a sustainable economic recovery.

Community Reinvestment Act Mitigates Damage to Communities Caused by Financial Crisis

A new study by the National Community Reinvestment Coalition finds that Community Reinvestment Act (CRA) regulated lenders avoided significant decreases in lending accompanied by the current foreclosure crisis and severe recession. The study compared home and small businesses lending and bank branching in two major metropolitan areas (Washington DC and Houston) over the volatile time period of 2006 through 2009. The Community Reinvestment Act (CRA) requires banks to serve communities, particularly low- and moderate-income communities, and by statute requires the lending be safe and sound.

This paper focuses on two major issues. First, it focuses on potential disparities in subprime lending that are not explained by borrowers’ financial qualifications or housing market characteristics. Then, the paper turns its attention to the impact of such lending disparities, among other factors, on foreclosure outcomes. The study is limited to mortgages originated in the Washington, DC, metropolitan statistical area between 2004 and 2007, while tracking the life of each mortgage through the end of 2008. This paper provides a detailed exploration of mortgage lending practices across minority communities in the DC MSA, and looks at the performance of these loans at a deeper level than is possible with Home Mortgage Disclosure Act (HMDA) data alone. The study combines loan terms and performance information from a database obtained from a proprietary source, Lender Processing Services (LPS), Inc., together with HMDA data.

Download PDF of the Full Study

Download PDF of Executive Summary

The report addresses the concerns surrounding foreclosure prevention rescue scams. The research study was conducted for a period of three months in mid-2009 using “fair lending matched pair testing” or mystery shopping” to assess the extent of the problem. Findings of the study demonstrate that an aggressive legislative solution and added public and private oversights and enforcement are necessary to prevent consumers from being harmed.

Small businesses are the driving force behind job creation, yet many struggle to find the capital they need to survive and grow. Women and minority-owned businesses face additional impediments. Today, we’re pleased to announce a new NCRC study, “Does CRA Small Business Lending Increase Employment: an Examination on a County Level.” The study looks at over 500 counties around the country, exploring the national impact of Community Reinvestment Act on small business lending.

The survey is designed to get a better understanding of the efforts being made by clients and servicers in helping secure mortgage assistance. The results of this survey will be used to identify what is working with existing foreclosure prevention programs and address necessary steps to remedy what is not working.

NCRC's 2010 Survey on the Home Affordable Mortgage Program (HAMP)