Communities of color in the United States, especially African American and Latinos, have been particularly hard hit by the coronavirus pandemic, from higher rates of illness and death to greater rates of unemployment, mortgage default, and eviction risk. These challenges have come on the heels of the devastating Great Recession, when these communities of color disproportionately experienced foreclosure, displacement, and loss of wealth, from which many families had yet to recover.
Together, these hardships, along with decades of government housing policy discrimination, have taken a serious toll: African American homeownership is now at only 44 percent compared to 74 percent for whites, the greatest divide in 50 years. Yet early warning signs indicate that African American and Latino homeowners will once again face disproportionately high foreclosure rates in the coming months and years unless Congress and federal housing agencies move quickly to head it off. Data already show that the rate of serious mortgage delinquencies will approach and may exceed the last foreclosure crisis.
In a survey by the Census Bureau, while 4 percent of white homeowners said they did not pay their mortgage in the last month, 13 percent of African American homeowners and 9 percent of Latino homeowners said they missed their mortgage payment. African American homeowners were three times more likely than white homeowners to say that they did not pay their mortgage, but black homeowners were only twice as likely to report that their mortgage payments were deferred by their mortgage company. These gaps likely will widen as unemployment insurance payments wane.
Why is this disparity in deferring mortgage payments so concerning? African American and Latino homeowners are more likely to face foreclosure at the end of next month when the halt on federal mortgage foreclosures ends because they are more likely to miss mortgage payments and are less likely to have made arrangements with their mortgage company.
Congress and the federal housing agencies have created special programs to assist homeowners unable to pay their mortgages due to hardships in the coronavirus crisis, including through the Cares Act. In addition to the federal foreclosure halt, forbearance plans provide a temporary reprieve from making mortgage payments for homeowners with hardships. Struggling homeowners with forbearance will have more affordable options to catch up on missed payments. Those with forbearance also are much more likely to be in touch with their mortgage company to obtain further assistance.
The Cares Act was an important first step in helping struggling homeowners. But more action is needed by Congress and federal regulators to prevent a flood of preventable foreclosures and bankruptcies, and to promote racial equity. In addition to losing their homes, many homeowners in foreclosure stand to lose their best chance at family wealth building.
Congress should expand Cares Act protections to the whole mortgage market and allow for automatic forbearances for delinquent borrowers, so that homeowners missing their mortgage payments have a chance to make arrangements before they find themselves in foreclosure. Mortgage companies should be required to offer affordable repayment options for homeowners catching up on missed payments, and should notify borrowers of their options in English and in notices for borrowers with limited English proficiency.
Federal regulators, such as the Consumer Financial Protection Bureau, must preserve and strengthen civil rights protections, including laws against “disparate impact.” They also should collect data and provide free public reports on developments in the entire mortgage market, including whether policies result in unfair disparities, especially for African American and Latino homeowners. Congress also should fund targeted interventions into communities hardest hit by foreclosure, providing civil legal aid services and housing counseling and assistance to states and localities to help homeowners, communities and investors.
It is not too late to make needed changes to the federal coronavirus relief programs. Congress and federal housing regulators can avert another wave of foreclosures and nurture an important pathway to creating generational wealth for African American and Latino families. But, to avoid the failings of the past and help repair decades of disinvestment and discrimination, action is needed right now. The United States is at a critical crossroad. Which path will we choose?
Derrick Johnson serves as the president and chief executive of the National Association for the Advancement of Colored People. Richard Dubois serves as executive director for the National Consumer Law Center in Washington.
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