Foreclosures have drained nearly $2 trillion in home equity from neighborhoods across the United States, according to a report from the ""Center for Responsible Lending"":http://www.responsiblelending.org/ (CRL).[IMAGE]
In a ""report"":http://www.responsiblelending.org/mortgage-lending/research-analysis/collateral-damage.pdf titled ""Collateral Damage: The Spillover Costs of Foreclosures,"" researchers Debbie Bocian, Wei Li, and Peter Smith conclude that, based on the 10.9 million loans that entered foreclosure between 2007 and 2011, approximately $1.95 trillion in property value has been or will be lost by residents who live close to foreclosed properties. This estimate includes losses stemming from completed foreclosures and future losses projected on foreclosure starts.
The researchers noted that the estimated cost does not include the total loss in home equity resulting from the foreclosure crisis (estimated at $7 trillion) and also does not take into account the equity lost by families who are actually foreclosed on. In addition, the report doesn't cover ""the billions of dollars drained from communities as a [COLUMN_BREAK]
result of lost tax revenue, vacant properties, increased crime, and lower school performance by children.""
Communities of color are seeing the greatest share of the $2 trillion loss, with more than half of the home equity drain impacting minority neighborhoods. The average spillover cost per family is or will be $21,000 in household wealth, or 7 percent of median home value, according to the report. However, in minority neighborhoods, the average loss is or will be $37,000, or 13 percent of home value.
Wade Henderson, president and CEO of the ""Leadership Conference on Civil and Human Rights"":http://www.civilrights.org/, called the report ""troubling evidence of how much the economic costs of foreclosures are spilling over into communities all over America."" He also said the increased cost to minorities comes at the hands of abusive lending and servicing behavior.
""Communities of color--which have been targeted for years by predatory lenders, and abused for years by mortgage servicers-have been practically drowning. Until policymakers get serious about reducing foreclosures and restoring meaningful home ownership in all communities, a full economic recovery will likely remain out of reach,"" Henderson said.
Janet Murguia, president and CEO of the ""National Council of La Raza"":http://www.nclr.org/, echoed the sentiment.
""The wealth drain triggered by foreclosures is continuing unabated, hurting Latino families and other vulnerable communities the hardest,"" Murguia said. ""We're calling on policymakers to show strong leadership in stopping the foreclosure crisis and making fair and sustainable housing a national priority.""