Foreclosures in state hit Latino homes hardest

Source: San Francisco Chronicle

A review of the damage wreaked on California communities by the housing bust shows that Latino households suffered nearly 50 percent of the foreclosures and that loan defaults are concentrated in the state's Central Valley.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/08/18/MNMR1EVAJ5.DTL#ixzz0x1WdUhuX


Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/08/18/MNMR1EVAJ5.DTL

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This makes no sense

I couldn't imagine that.

California was one of the 4 states with the highest numbers of subprime mortgages, and the largest number of questionable lenders (along with Fla, Arizona, Nevada).
The ratio of house price to income in the rest of the nation had traditionally been 3:1 - as the subprime mkt grew it went to 4 to 1.

But in California, it was 10 to 1. Miami was 8.5 to 1. Other places were nearer the national average.

You had large concentrations of people of color, as well as people with less than average income, and there is a tremendous amount of evidence that the consumer finance companies went after them first, then the mortgage brokers. But when a white person vs a person of color was sold a mortgage, credit score, history, job, and income all being equal, the person of color was half again as likely to be sold some adjustable rate crap, 30 years, just pay interest while your principal increases, oh, want the interest deferred-sure no problem, no documentation loans for no money down.

And since the billions of dollars of profit in the derivatives market that was wrapped around this depended on house prices rising, and the need to write NEW loans to make more money, they would come through again a few months or a year later and take lists of the homes, contacting the owner, "Say, your home is worth more now - we can re-fi (same crappy loans) and you can get rid of that nasty ol' hospital bill, or consolidate all those credit cards, or take that trip you have always wanted to take".

One story I read in (In The Big Short, I think, but there are lots of other stories out there) showed a Mexican strawberry picker with an income of $14,000 who they sold a loan to for every penney of a $724,000 house.

If you have no income, live in a crappy place, (or maybe just live in a modest home but you have some medical bills and a few credit cards) and someone approaches you and shows you how you can sign up for a home, which will go up in value ("Because NEVER in the history of the United States, Ms. Smith, has the housing market declined across the whole country at once, so we KNOW your house is going to be worth more next year - no money? No problem, we don't even need any, just sign here")

And now you are the proud owner of a home. Surely you will be able to figure it out...

And as this huge market grew, market makers in bonds saw the default rates, traditionally 1%, begin to rise to 4, 5, and 6%, saw that the loans being bundled into bonds were 50, 80, or 90% subprime, they sold even more insurance against default on the loans, and then found ways to sell insurance on the loans that wasn't even tied to the loans, and suddenly there are papers with a face falue of hundreds of trillions, perhaps, all hidden behind the veil of the investment banks, all on top of a measly $13 or so trillion of total mortgages in the whole country. And when some of those selling buying that insurance saw what was happening, they started doing things to make the market seize up, so their bets would pay off.

And then homes stopped rising in value. That's all it took. And it all began to spin apart.

The only thing that would make no sense is how it could have worked out any differently...

Thanks for laying it out so clearly. :(

can, Amazon -

It Takes a Pillage
Econned
13 Bankers
The Big Short

Are all pretty good, in their own way, chronicles of what went on, and what the future holds (this isn't over, and the finance companies are digging another hole as we speak, uh, type)

if anything, Latinos were targeted. Where I live, many Latinos that owned homes already were being specifically targeted to refinance their homes. The smart ones who smelled the stinking rat did not do it.

I had a brother that bought a brand new home in the year 2001 being told it was a great investment for him. The cost was $320,000.00. Said home is today worth perhaps $250,000.00 and this is after the big boom. This house was worth as much as over 1/2 million $ for awhile and now it and the entire area where he is located has taken a huge downturn in home values.

I got very lucky. At this same time I bought a house that was foreclosed for about 1/4th of the price of my brother's house. I'm still living in this small home today but I spend little as I am on a fixed income and most of my income goes towards keeping my home. :scared:

The sharks that did this knew who they were targeting - the poor and the minorities.

Damn them all and yes, thanks for your highly informative and correct post. It is sad but true.

:kick: