Statistics about California’s foreclosure crisis involving loans originated between 2004 and 2007 abound. During the period from July 2006 through October 2009, 48% of California homes foreclosed on and repossessed by lenders were owned by Latinos, the ethnic group hardest hit by California’s foreclosure crisis as reported by the Center for Responsible Lending (CRL).

Further, 54% of African-Americans and 47% of Latino homebuyers in 2006 were charged higher interest rates on their mortgages for single family residences (SFRs) than non-Hispanic, Caucasian borrowers. Today, Latinos account for nearly half of California’s foreclosure volume, but they only make up 21% of California’s homeowners and one-third of California’s adult population. However, the high volume of foreclosures these homebuyers suffered was not the result of their ethnicity, but rather the terms of the loans the lenders saw fit to give them.

first tuesday take: The most revealing factor in the CRL report is the fact lenders targeted then steered Latinos and other minority borrowers into unacceptable, improper real estate financing — adjustable rate mortgages (ARMs) — solely to increase profit without separate economic justification. With exposure to predatory lending practices, no first-time homebuyer was safe (much less protected by the enforcement of regulations) from knowingly risky mortgages made during the Millennium Boom. These ARM loans, improper when made, now weigh heavily as a contributing factor to the dire straits of California’s real estate market since nothing is being done to square loan balances with current home values. [For more information on ARMs, see the March 2010 first tuesday article The danger of an ARMs build-up.]

Re: “Dreams deferred: impacts and characteristics of the California foreclosure crisis” from the August 2010 Center for Responsible Lending report; “Foreclosures in state hit Latinos hardest” from the San Francisco Chronicle; “California home foreclosures hit Latinos hardest, study says” from the Sacramento Bee; “Study: how to stop unnecessary foreclosures” from the Orange County Register.