An overwhelming majority of homes in California's major cities that are in danger of foreclosure are also in majority-minority ZIP codes, according to a report released this week.
The report focuses particularly on homes with mortgages serviced by Wells Fargo. Of the 21 major California cities examined, more than eight in 10 homes in danger of foreclosure are in areas where at least half of its residents are minorities — evidence, the report's authors say, that further supports the idea that the housing crisis has been particularly harmful to African-American and Hispanic homeowners.
The findings come on the heels of the housing-market decline and the ensuing Great Recession that ensnared many homeowners who have been fighting to maintain their financial standing and retain their homes. While the report focuses on the California economy, other Americans are in similar circumstances. Across the nation, homeowners — many of them minorities — struggle to stay afloat as they watch their savings plummet and their dreams of maintaining a middle-class American lifestyle disappear. In its place are notices of default and the impending threat of bankruptcy.
In California, a total of 65,466 homes are in the pipeline for foreclosure, many of them purchased before the housing market crash in 2007.
Coauthor Ady Barkan, of the Center for Popular Democracy, a national organization based in New York, said the report focuses on Wells Fargo because the bank is responsible for the highest number of homes in California's foreclosure pipeline — in addition to being headquartered in the same state. As leading lender, the bank is responsible for mortgages for 11,616 California homes — nearly 1 in 5 homes in the pipeline.
The "foreclosure pipeline" refers to homes that have received a notice of default or a notice of trustee sale. While some homeowners eventually pay back the debt, more often the homes are foreclosed, Barkan said.
Wells Fargo spokeswoman Vickie Adams took a contrary view, saying that the term "pipeline" can be overused and doesn't take into consideration the complexities of the mortgage-lending industry. She added that the bank offers various programs and workshops to help educate its customers on their options to prevent losing their home.
"It's always challenging to articulate some of the specifics of what some perceive to be a pipeline of sorts," she said. "The facts are when a home has come to foreclosure, there are oftentimes that a customer is able to find options to prevent [it]."¦ In foreclosure, no one wins. What we do is try to provide a great deal of support to the community in a number of ways."
The wide variety of data sources that reports use can often create conclusions that aren't necessarily in line with standard industry practices, Adams added.
"We all understand everyone's right to raise issues they believe are important, but I think it's really important, again, to look at the data and understand what the data says and use the measures that are appropriate for the industry," she added.
According to the report, the opaque nature of Wells Fargo's reporting data has made it difficult to track who is receiving the help. The report's authors urge the bank to practice more-transparent reporting practices that include race, ZIP code, and income data for all foreclosures, short sales, and principal reductions.
According to Adams, the data for relief efforts and other information is available through industry publications such as RealtyTrac and Inside Mortgage Finance, as well as government sources.
Last year, the bank settled a lawsuit with the Justice Department, which alleged that the financial institution had discriminated against minority borrowers during the housing bubble, charging higher fees and rates to minorities than whites, even when they had the same credit risk.
The Wells Fargo case wasn't unique: Lawsuits surrounding discriminatory housing practices and predatory sub-prime mortgage lending hit major banks everywhere.
Using data from the Home Mortgage Disclosure Act Database, the report found that between 2007 and 2009, Wells Fargo was 188 percent more likely to put African-Americans into riskier sub-prime loans than white borrowers with similar credit history; the risk for Hispanics was 117 percent.
Adams maintains that Wells Fargo is a "fair and responsible lender" that adheres to regulations according to the Fair Lending Act. She added that the bank works closely with various advocacy and real estate organizations to help minority and low-income borrowers.
The report, co-authored by the Alliance of Californians for Community Empowerment, Center for Popular Democracy, and the Home Defenders League, asks Wells Fargo to commit to principal reductions in the interest of saving homeowners from complete financial ruin.
Between 2009 and 2012, Wells Fargo granted $6.3 billion in principal forgiveness; their goal is to hit $7 billion by 2014, Adams said.
"We take it very seriously, and we work very hard at it. We really are focused on excellence, helping our customers succeed financially, and we have a culture of continuously improving our home-lending activity," Adams said.
The report argues that allowing all 65,466 homes in California to be foreclosed would be a detriment to the state and local economy. Foreclosure would cause the homes to lose 22 percent of their value, at an estimated cost of $7.6 billion. Maintenance costs for vacant homes would cost the government $19,227, resulting in a total cost of nearly $467 million for taxpayers.
"Communities have already sustained significant harm from the foreclosure crisis; unless Wells Fargo changes its practices, more harm will be done in coming months and years. New homes continue to enter the pipeline, inflicting tremendous stress and damage on homeowners and communities until Wells Fargo adopts significant new policies," the report states.