HOUSING PUSH FOR HISPANICS SPAWNS WAVE OF FORECLOSURES
January 6, 2009
For years, immigrants to the U.S. have viewed buying a home as the ultimate benchmark of success. Mortgage lenders appear to have regarded Latinos as a largely untapped demographic
- Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster, increasing by 47 percent, to 6.1 million from 4.1 million, according to the U.S. Census Bureau.
- In 2005 alone, mortgages to Hispanics jumped by 29 percent, with expensive nonprime mortgages soaring 169 percent, according to the Federal Financial Institutions Examination Council.
Many were first or second-generation U.S. residents who didn't own homes. Many Hispanic families had multiple wage earners working multiple cash jobs, but had no savings or established credit history to allow them to qualify for traditional loans.
Mortgage lending to Hispanics took off between 2004 and 2007, powered by nonprime loans, which carry high interest rates and are tailored to borrowers with low credit scores or few assets. Consider:
- The biggest jump occurred in 2005, with a 169 percent increase in nonprime mortgages to Hispanics.
- This year outpaced a 122 percent gain for blacks, and a 110 percent increase for whites.
Regions of the country where the housing bubble grew biggest, such as California, Nevada and Florida, are heavily populated by Latinos, many of whom worked in the construction industry during the housing boom. But when these markets began to weaken, bad loans depressed the value of neighboring properties, creating a downward spiral.
Increases in lending to Hispanics may have intended to open the doors to the American Dream for first-time home buyers. But in reality, for many of them, these doors have been slammed shut
Source: Susan Schmidt and Maurice Tamman, "Housing Push for Hispanics Spawns Wave of Foreclosures," Wall Street Journal, January 5, 2009.
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