Report: Foreclosures cost neighbors $1.95 trillion
Study seeks to quantify the equity lost by homeowners from nearby foreclosures betwen 2007 and 2011. Minority communities have suffered disproportionate losses, according to the report.
We all know that foreclosures inflict "collateral damage" and drag down property values for the entire neighborhood.
The Center for Responsible Lending has now quantified the cost: Americans have lost nearly $2 trillion in equity from nearby foreclosures, according to a new report, "Collateral Damage: The Spillover Costs of Foreclosures."
That’s just the equity lost by the neighbors from homes that entered the foreclosure process between 2007 and 2011, not the losses incurred by the foreclosed homeowners themselves or the costs to communities in lost tax revenue and higher crime rates. It’s estimated that Americans have lost $7 trillion in equity during the foreclosure crisis.
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"CRL’s report is troubling evidence of how much the economic costs of foreclosures are spilling over into communities all over America," Wade Henderson, president and CEO of the Leadership Conference on Civil and Human Rights, said in a news release. "Communities of color, which have been targeted for years by predatory lenders and abused for years by mortgage servicers, have been practically drowning."
More than half that $1.95 trillion in lost equity came from minority homeowners, the group said, whose neighborhoods have suffered disproportionately from the foreclosure crisis and the scourge of bad subprime loans.
A number of lenders have faced legal action for failing to maintain foreclosed properties in minority neighborhoods.
According to the center’s calculations, the average loss of equity from nearby foreclosures is $21,000, or 7% of median home value. In minority neighborhoods, the average loss was $37,000, or 13% of median home value.
"Once you get one or two or three foreclosures on a block, you start really creating all kinds of negative spillover effects on the neighborhood, and crime is just one of them,” Georgia Tech professor Dan Immergluck said last year in a report on the MarketPlace radio program. Immergluck has studied foreclosure effects on communities and is the author of "Foreclosed: High-Risk Lending, Deregulation, and the Undermining of America's Mortgage Market."
Papa Joe, you know nothing about the free market. Real Estate companies have NO control over the cost of housing. They simply work within the market forces. Please explain how a realtor can manipulate the price of a house.
Victo34455, This WAS happening under the Bush administration, true, but it was Dodd/Frank who were directly overseeing the process and they are the ones who have the responsibility for what happened.
Nobody lost any "equity" the housing bubble was created by greedy real estate shysters artificially inflating the value and stupid gullible ignorant "greedy" people who jumped into the ponzi style scheme "pyramid scheme" too close to the end.
As Gump's mommy said: "Stupid is as stupid does."
If you see homes like this, contact me. I want to buy them and fix them.
Silly neighbors, how dare they end up next to a house that foreclosed?
Their fault entirely for taking out a mortgage...
Um, BTW, things are entirely different in Iceland where the Bankers were punished and the Homeowner who dared to take out a mortgage were helped if they needed it...
How come no stories to this effect, MSN? I'd like to know that data, too.
plaineyjaney please tell the whole truth. For example the republicans are in bed with the bankers, all of Wall Street, big oil, big pharma, the insurance industry, defense contractors, etc., etc., etc. The K Street talking points that seem to blame liberals for everything while ignoring the actions of conservatives that have been absolutely detrimental to the USA is absurd and solves nothing.
@38Super, you are 99% right. There are a few people who lose their houses to other circumstances, however, and I truly feel bad for them. As for most people, the ones taking exotic loans in order to get a house, HAD to know that when the truth in lending statement they had to sign to get the house told them their payments would quadruple, or that they would owe a giant balloon payment at the end of a loan, that they were going to lose the house. I don't know how they couldn't have seen it.
It isn't just about minorities, though. It's about everyone who wants more than the can afford, and who isn't willing to wait until they can.
Well there is no one to blame but the home buyers themselves. Most could not afford what they bought. During the bubble the scam was purpetrated by the Government i.e.. Fanny, Freddie, VHA, and banks. Wall street saw a way to rip everyone off and did so. So who got baied out the above aforementioned because they were ll in bed together. I'm tired of hearing about the por minorities, most should have never been allowed to buy a house in the first place because they could not pay the mortgage. Majority of home buyers were way in over their heads and barely living pay check to paycheck, with credit cards maxed out or close to it. There is a sucker born every day. All of a sudden now banks are want what they should have wanted all along, reasonable down payments, good credit history, monhtly incomes much greater than the mortgage payments and etc. Did any of these homebuyers think about what if I loose my job can I continue to pay my mortgage? I feel sorry for some buyers but most I do not, because they should have never been allowed to buy in the first place.
God I wish people would understand what happened. This article is one of many stupid articles. The foreclosure rate and or area is not what lost equity on housing. The Equity was false. It was not a real appreciation therefore not real money.
Many people who got foreclosed on did so because of this false equity. They went to refi to get out of there problem and found they owed more than they where worth.
Property increase at rates of 15 and 20% A Freaking YEAR, from 2003 till 2007. This was not a true indicator of value. There was never a housing shortage and never a value increase. REALTORS for the most part started turning houses like a deck of cards. and with ever re-sale added another 7% to the property to cover there FEE. That is a 7% increase on every 100k of value when the national average was 4%. The Banks would loan based on Credit and appraisal value. Yes they where giving away money, But it was based on false equity. NO ONE in America was protected from this. Most people are upside down today and don't even know it because the are current and have no reason to move or even get a value on there home.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.