Leaders must take action to halt foreclosure crisis for minorities

Communities of color across the United States, like African Americans and Latinos, have been notably hard hit with the coronavirus pandemic, from higher rates of illness and death to higher rates of unemployment, mortgage default, and eviction risk. Such challenges have come on the heels of the devastating Great Recession, when the same communities disproportionately experienced foreclosure, displacement, and loss of wealth, from which many families have not even recovered.

These hardships and decades of govermment policy discrimination have taken a serious toll. African American homeowners are just at 44 percent, compared to white homeowners at 74 percent, the greatest divide in five decades. Recent warning signs indicate that African American and Latino homeowners could once again face disproportionately higher foreclosure rates for the coming months and years unless Congress and some federal agencies move to head it off. Data show that the rate of serious mortgage default will rise and could exceed the last foreclosure crisis.

In the survey by the Census Bureau, 4 percent of white homeowners said that they did not pay their mortgage in the last month, while 13 percent of African American homeowners and 9 percent of Latino homeowners said that they did not pay their mortgage. African American homeowners were three times more likely than white homeowners to report that they did not pay their mortgage, but African American homeowners were only twice as likely to report that their mortgage payments were deferred. Such divides will likely grow as unemployment insurance payments wane.

Why is this disparity in deferred mortgage payments concerning? African American and Latino homeowners are more likely to face foreclosures by the end of next month when the halt on federal foreclosures ends, since they are much more likely to miss mortgage payments plus less likely to have made new arrangements with their mortgage company.

Congress and federal agencies have special created programs to assist homeowners unable to pay their mortgages because of hardships in the coronavirus crisis. Besides the halt on federal foreclosures, forbearance plans provide temporary reprieves from making mortgage payments for homeowners who face hardships. Those homeowners with forbearance will have more affordable options to catch up with late payments. Those homeowners with forbearance also are much more likely to be in touch with their mortgage company to obtain additional guidance.

Passing the Cares Act was an important measure with helping struggling homeowners. But more action needs to be taken by Congress and federal agencies to prevent a flood of preventable foreclosures and bankruptcies and to promote racial equity. Many homeowners in foreclosure also stand to lose their best financial chance at family wealth building.

Congress should expand Cares Act protections for the entire mortgage market and allow for automatic forbearances, so homeowners who miss their mortgage payments have a chance to make plans before they find themselves in foreclosure. Mortgage companies should offer affordable options for homeowners to catch up with late mortgage payments. The mortgage companies should inform borrowers of options in English and with notices to borrowers with limited language proficiency.

Federal agencies, like the Consumer Financial Protection Bureau, must preserve and strengthen civil rights protections, including laws against disparate impact. They should also collect data and provide free public reports on developments in the entire mortgage market, including over policies resulting in unfair disparities, notably to African Americans and Latinos. Congress should fund targeted interventions into communities hard hit by foreclosures, providing legal aid services and counseling for states and localities to assist the homeowners and investors.

There is still time to make the necessary changes to the coronavirus relief programs. Congress and federal agencies can avert another dire wave of foreclosures and nurture the important pathway to creating family wealth for African Americans and Latinos. But to avoid the failings of the past and repair decades of disinvestment and discrimination, action is needed now. The country is at a crossroads. What direction will we choose?

Derrick Johnson serves as the president and chief executive of the National Association for the Advancement of Colored People. Richard Dubois serves as executive director for the National Consumer Law Center in Washington.