By Michael Froehlich
The 2008 mortgage foreclosure crisis was brutal. That year, over 800,000 homeowners nationwide lost their homes, and in Philadelphia, where I work as a legal aid lawyer, banks were filing lawsuits to foreclose on 120 households every week.
But the foreclosure crisis a decade ago did not affect everyone equally. The Black and LatinX homeownership rate fell much sharper than the white homeownership rate during the crisis, and it has never recovered.
Earlier this year, 74 percent of white households owned their home, while only 44 percent of Black households and 49 percent of LatinX households were homeowners. And since homeownership makes up such a large part of a family’s wealth, the median white family now has over ten times the wealth as the median Black family.
Unfortunately, unless policymakers swiftly address the systemic racism that leads to people of color losing their homes, the pandemic is about to make the racial wealth gap even worse.
As the coronavirus took hold across the country, businesses shuttered to slow the infection. More than two million Pennsylvanians lost their jobs through no fault of their own. And while the unemployment compensation and other safety net systems struggle to keep up, many Pennsylvanians have fallen behind in their monthly bills, including their mortgages.
Once again, the pandemic is not harming all homeowners equally.
According to recently released data from the U.S. Census, in Pennsylvania, 12 percent of white homeowners with mortgages reported not being able to make their May payment (either because they missed their payment or got into a program.) But 23 percent–nearly twice the rate–of Black homeowners were not able to do so. And 31 percent –nearly 2-1/2 times the rate–of LatinX homeowners were not able to do so.
It gets even worse. Mortgage companies have offered forbearance programs that postpone mortgage payments for homeowners who have lost income because of the coronavirus. But they only offer them to homeowners that explicitly ask for them.
These forbearance programs are critical to help homeowners save their homes from sheriff sales when we come out of the pandemic.
While 66 percent of white homeowners who reported not being able to make their May payment are enrolled in forbearance programs in Pennsylvania, only 17 percent of Black homeowners and 26% of LatinX homeowners are enrolled in these programs.
To put it another way, if homeowners of color in Pennsylvania experienced the pandemic as white homeowners are experiencing it, 21,000 fewer Black homeowners and 37,000 fewer LatinX homeowners would currently be at risk of losing their home at sheriff sale.
Once mortgage forbearances end, homeowners will need access to affordable repayment plans and workouts to deal with their missed payments. If we fail to fix the racial disparity in accessing mortgage relief, Black and LatinX homeowners will be even more likely to lose their homes to a new wave of foreclosures in the coming year.
The federal government, the Commonwealth, and the state and local courts have all taken important steps to offer help to homeowners affected by the pandemic. Most mortgages are covered by a moratorium on new and pending foreclosure activity through the end of August. This includes the 70 percent of home mortgages that are backed by the federal government.
But policy makers must take steps to address the structural racism that has disproportionately affected Black and LatinX homeowners. The National Consumer Law Center has recently offered several recommendations.
First, Black and LatinX communities can receive targeted interventions, such as legal services and housing counselors, to ensure they are able to efficiently access all available foreclosure prevention alternatives.
Second, Congress can expand CARES Act protections to apply to private mortgages, adopt automatic forbearances and affordable repayment options for delinquent borrowers, and stay further foreclosures if the coronavirus continues to spread.
Third, the Consumer Federal Protection Bureau (CFPB) and other federal regulators can collect and report demographic data on how homeowners are experiencing the pandemic, including data on who is qualifying for forbearances.
Pre-pandemic, Black and LatinX homeowners had begun to recover from the 2008 mortgage foreclosure crisis. Unless policymakers act soon, the ravages of the pandemic will set homeowners of color back once again.
Michael Froehlich is the Managing Attorney of the Homeownership and Consumer Rights Unit at Community Legal Services in Philadelphia, Pa.