WASHINGTON — The nationwide foreclosure crisis is not even halfway over, according to a bleak new report from a consumer advocacy group.
The report from the Center for Responsible Lending found that 2.7 million U.S. households that received mortgages between 2004 and 2008 have lost their homes to foreclosure, while another 3.6 million households from that same group of borrowers are either 60 or more days delinquent or in the midst of the foreclosure process.
The non-profit organization's findings help to quantify many widespread perceptions about the crisis, including the idea that riskier loan products originated during the housing bubble are more likely to end in foreclosure.
"The foreclosure rates are consistently worse for borrowers who received high-risk loan products that were aggressively marketed before the housing crash," the report states. "Foreclosure rates are highest in neighborhoods where these loans were concentrated."
For example, loans with pre-payment penalties were more than three times as likely to end in foreclosures than loans without pre-payment penalties. Loans with higher interest rates, a category that includes many subprime mortgages, were also more than three times as likely to end in foreclosures than less expensive mortgages.
Adjustable-rate mortgages that reset to higher interest rates in less than five years or allowed borrowers to delay paying down the loan's principal were about four times more likely than other loans to end with the borrower losing his or her home in a foreclosure.
The federal government does not track the performance of mortgages in any comprehensive way. In order to do that, the researchers combined federal data on mortgage originations with information on the performance of loans from two private databases. The resulting study includes data on about 27 million loans, or about 63% of the mortgages in the federal database that were originated between 2004 and 2008.
The report found that white households, along with middle-income and higher-income earners, make up the vast majority of households that have lost their homes.
At the same time, it found that minority households and lower-income borrowers have been disproportionately affected by the crisis.
The foreclosure rate for whites was 5.1%, while for Asian Americans it was 6.6%, for African Americans it was 9.8%, and for Latinos it was 11.9%. The racial disparities persisted when the researchers looked only at higher-income borrowers.
The report also found that in geographic areas where home prices boomed, such as California and Nevada, foreclosure rates are highest among middle-income and higher-income borrowers. The reverse is true in areas where housing prices did not rise sharply prior to the crisis. Foreclosure rates in those areas are highest for low-income borrowers.
Because all of the report's findings involve loans originated between 2004 and 2008, the authors warned that their estimate of 3.6 million households still at immediate, serious risk of losing their homes represent only a subset of the likely foreclosures ahead.