News Release

July 30, 2009

Contact: Erin Angell Collins, 202-220-6317, ecollins@nw.org
Douglas Robinson, 202-220-2360, drobinson@nw.org

NeighborWorks America Report Shows Hispanic Homeowners
Are Hard Hit by the Foreclosure Crisis
47 Percent of Hispanic NFMC Clients Held Adjustable Rate Mortgages
Only 18 percent of Mortgages Nationwide Are ARMs

Washington, DC – Today NeighborWorks America, the administrator of the Congressionally authorized National Foreclosure Mitigation Counseling (NFMC) program, announced that of the more than 363,000 homeowners who received foreclosure prevention counseling as a result of NFMC funding through March 31, 2009, 21 percent were Hispanic homeowners, nearly twice their representation of total homeowners.  In all, 53 percent of NFMC Program clients were minority homeowners, or more than twice the overall percentage of minority homeowners.

The data reported today are part of the third NFMC report distributed to Congress in June 2009, and are based on client information provided from more than 1,700 HUD-approved housing counseling intermediaries, state housing finance agencies, and nonprofit housing counseling agencies that received NFMC funding through March 31, 2009.  As of June 30, 2009, more than 540,000 homeowners have received foreclosure prevention counseling as a result of NFMC funding.

Nationwide, Hispanic homeowners make up only 11 percent of the nation’s homeowners, according to industry studies.  Twenty-four percent of the nation’s homeowners are racial/ethnic minorities, with African American homeowners accounting for 9 percent, and Asian/Pacific Islanders accounting for 4 percent.

Also according to the NeighborWorks America NFMC report, Hispanic clients who sought foreclosure prevention counseling were the only group of homeowners more likely to hold adjustable rate mortgages (ARMs) than fixed rate mortgages.  Forty-seven percent (47 percent) of Hispanic NFMC clients held ARMs, and 41 percent held fixed rate mortgages.  Nationwide, only 18 percent of outstanding mortgages are ARMs.  All other NFMC clients were more likely to hold fixed rate mortgages than ARMs.  Fifty-one percent (51 percent) of African American clients held fixed rate mortgages, and 38 percent held ARMs.  Like African American NFMC clients, White NFMC clients were more likely to hold fixed rate mortgages (59 percent) than ARMs (31 percent). 

The report also noted that lower-income homeowners are likely to have a greater rate of foreclosure starts than higher-income homeowners.  Twenty-two percent (22 percent) of Hispanic NFMC clients reported earning 80 percent or below their Area Median Income. 

“During the housing boom, many Hispanic homeowners were steered into high-cost loans by unscrupulous lenders in order to gain a foothold into the housing market.  Now that the boom has gone bust, the foreclosure crisis is disproportionately affecting Hispanic homeowners who are more likely to have high cost, exotic loans like adjustable rate mortgages and interest-only loans,” said Ken Wade, CEO of NeighborWorks America. “We are encouraged that the data demonstrate the NFMC program is assisting the homeowners who have been hardest hit by this foreclosure crisis. Thanks to the expertise of housing counseling agencies and certified counselors throughout the nation, more than a half a million families have received the foreclosure intervention counseling they need, and are better informed about their options to avoid home foreclosure.”

The NFMC program is positively affecting the lives of real people like Monica Castaneda.  Monica and her husband were expecting their third child when they decided to walk away from their home in Sacramento, California. They were going to cut their losses with a short sale and find an apartment for their family of five.

But one phone call to the NeighborWorks Homeownership Center in Sacramento gave the Castaneda’s the hope they needed to fight for their home.

“If we hadn’t contacted the homeownership center we would have lost our home,” said Monica. “We got a counselor who really advocated for us. She asked us ‘is your home worth it?’ And when I said yes, she said, ‘Well let’s fight for it.’ She gave us hope.”

Four years ago, Monica and her husband became proud first time homeowners. At the time, it was a sellers’ market. Housing prices were rising sharply, as the market grew more competitive with an increase of buyers who were qualifying for easy loans.

“We felt that if we didn’t jump into the market, we would never be able to afford a home in California,” said Monica.

They worked with a trusted friend to secure financing; a friend who Monica says assured them that refinancing would be no problem. They got an “80/20” loan, with a 10.75 percent interest rate on the first mortgage and 8 percent on the second mortgage. The first mortgage was interest only.

“We accepted the loans, hoping that we could refinance and get just one loan in a couple of years,” said Monica.

But all too quickly, the housing boom started to crumble and housing values fell. Paying the mortgage was growing more difficult and the Castaneda’s tried to refinance. They were denied by their lender, and “looked everywhere to get a new loan, but no luck,” said Monica.

The couple stopped making payments on the first loan and the threat of foreclosure loomed. Seven months behind on their payments, the Castanedas decided it was time to give up.

But then Monica’s mother-in-law mentioned the HOPE NOW hotline. Monica called with little hope, convinced that a short sale was their only option. She was referred to the NeighborWorks Homeownership Center in Sacramento, an NFMC Program Grantee.

“When I called, I got an appointment for that very day,” said Monica. Ever since then, Monica says her counselor, Wendy Martin, has worked tireless and patiently with them and their lender, eventually getting a 30-year loan with a fixed rate of 5.75 percent on the delinquent loan. The overdue portion was capitalized at the end of the loan.

Now, still at home with her newborn, Monica says she’s gearing up to work on modifying the second loan. Her counselor said that she is waiting to help when Monica is ready.

For more information about the National Foreclosure Mitigation Counseling program, visit www.nw.org/nfmc.

**Homeowners can locate a NFMC-funded counseling agency by visiting www.findaforeclosurecounselor.org.**

About NeighborWorks America

NeighborWorks America creates opportunities for people to improve their lives and strengthen their communities by providing access to homeownership and to safe and affordable rental housing. Since 1991, we have assisted nearly 1.2 million low- to moderate-income families with their housing needs. Much of our success is achieved through our support of the NeighborWorks network ― more than 230 community development organizations working in more than 4,400 urban, suburban and rural communities in all 50 states, the District of Columbia and Puerto Rico. In the last five years, NeighborWorks organizations have generated more than $15 billion in reinvestment in these communities. NeighborWorks America is the nation’s leading trainer of community development and affordable housing professionals.