Posted by US Loan Auditors in Mortgage Crisis
on 03 31st, 2010 | no responses
Lending institutions that practiced predatory lending in California communities in Los Angeles, Oakland, Sacramento, San Diego and Stockton with high cost subprime loans are failing to prevent foreclosures in those communities.
The California Reinvestment Coalitions new report reveals that there is a return to high and disparate rates of loan denial for applicants of color. Research using lending and loan modification data have been inaccessible and rarely analyzed however the California Reinvestment Coalition is analyzing the data and finding results that are disparaging. The report looks at data among the mentioned cities over the last three years and how financial institutions have acted in those cities.
The data shows that there is still a vast dispossession in communities with high citizenship of African American and Latino residents. The report found that not only did these communities have the highest concentration of predatory lending; they had the highest concentration of foreclosures. The report also shows that these communities also had the lowest loan modification numbers and a vast drop in new prime rate loans than other communities.
Financial institutions are not meeting their commitments of assisting families in staying in their homes. The situation is furthering the destabilization of California communities. Kevin Stein, Associate Director of The California Reinvestment Coalition stated that Policy makers and regulatory agencies must compel banks to restructure loans that include those who are unemployed and those who owe more than what their property is worth. They need to ensure that loan modification and foreclosure prevention are available to everyone.
The report has five key findings:
- Financial Institutions saturated California communities with high cost predatory loans. The best example of this is Oakland were the lending institutions made over seventy percent of all high cost loans in communities that were predominantly of color and only make approximately forty percent of lower cost prime loans in those communities.
- Loans that were unsustainable to begin with created foreclosures that were concentrated in those same areas. The five communities each had foreclosures disproportionately affecting communities of color. The report shows that in Los Angeles zip codes that contain eighty percent of color residents had over sixty three percent of the city’s housing and suffered over ninety percent of the foreclosures in that city.
- Financial Institutions are failing to work with and prevent foreclosure. The loan level data representing one sixth of all the mortgages that are in foreclosures and twenty percent of all loan modifications prove the lack of lending institutions actions to prevent and work with communities. The data from December of 2008 to November of 2009 shows that Sacramento and San Diego have fewer than one thousand permanent loan modifications, while Oakland had only three hundred seventy two and Los Angeles had only two thousand three hundred twenty six.
- Financial Institutions are denying credit to those communities most affected by the bad lending practices and thus causing Re-redlining. Communities of color saw a decrease in prime loans in the year 2008. Drop off in prime loans began in 2006 through 2008 in the city of Oakland. The numbers for Oakland prime loans in 2006 were three thousand nine hundred and by 2008 the numbers were one thousand three hundred. The numbers for Los Angeles were just as discouraging, prime loans went from seventeen thousand six hundred fifteen in 2006 and by 2008 were four thousand six hundred twenty three.