According to a study by Center for Responsible Lending, we are likely only
halfway through the foreclosure crisis. Based on the Center's numbers,
6.4% of loans made between 2004-2008 have ended in
foreclosure so far. That represents 2.7 million loans. There are another 8.3% (or
3.6 million loans) at immediate risk of default. Loans with more exotic
terms naturally have much higher delinquency rates than more traditional loans.
The study also reveals that while the majority of households currently
affected by the crisis were white, one quarter of African-American and
Latino borrowers have lost their homes. This matches up with the study's
data relating to high-risk loans and higher rates of delinquency -- minority
borrowers were more likely to have been sold risky loans.
What this really demonstrates is that the efforts to slow down the crisis
have done nothing to alleviate the causes of the crisis -- homeowners
remain in exotic loans that they can no longer afford, 1 in 4 homes are
underwater, and unemployment persists at record levels. If we continue
to kick the can down the road, all we will do is make the crisis longer
and more painful.
As the report's
executive summary notes, these problems will continue to surface until we can generate a
regulatory scheme that prevents risky and predatory loans, while making
sure that qualified borrowers are able to obtain affordable credit.