The Unraveling of the American Dream: Foreclosures and Communities of Color in Minneapolis

Ryan Allen

May 14, 2009

National Neighborhood Indicators Partnership

Research Dilemma

Minority households have increased their presence in the housing market Minority homeownership rate 1994

= 43% Minority homeownership rate 2007

= 51% Strong economy, looser mortgage

underwriting and new mortgage products

Foreclosure crisis! Minorities disproportionately hold

subprime mortgages To what extent have minority

households experienced foreclosure?

Existing Research Findings Only two studies have focused on

race/ethnicity and foreclosures Boston Metro Area California

Blacks, Hispanics and Asians more likely to experience a foreclosure compared to Whites

No studies have focused on nativity status or household composition

Why Study Foreclosures, Immigrants and Kids? Increased presence of

immigrants in housing markets

Percentage of Foreign Born Households in Minneapolis, 1980-2007

0%

2%

4%

6%

8%

10%

12%

14%

16%

1980 1990 2000 2007

Year

% o

f F

ore

ign

Bo

rn H

ou

se

ho

lds

Source: Census 1980, 1990, 2000; American Community Survey 2007

Why Study Foreclosures and Immigrants? Increased presence of

immigrants in housing markets Households with children may

be especially vulnerable

Why Study Foreclosures and Immigrants? Increased presence of

immigrants in housing markets Households with children may be

especially vulnerable Foreclosures are increasingly

common

Foreclosed Mortgages in the US

Source: Mortgage Bankers Association, National Delinquency Survey

0

0.5

1

1.5

2

2.5

3

3.5

Quarter

Pro

po

rtio

n o

f M

ort

ga

ge

s i

n F

ore

clo

su

re

Foreclosures in Minneapolis, 2005-2008

YearForeclosed Housing

Units

2005 861

2006 1649

2007 3026

2008 3077*

Total 8613

Source: Hennepin County Sheriff Sales Data; * designates foreclosed properties rather than units

Why Study Foreclosures and Immigrants? Increased presence of immigrants in

housing markets Households with children may be

especially vulnerable Foreclosures are increasingly

common Individual, household and

community-level effects Loss of equity, declining credit scores Massive disruption to households

Churning in schools, employment Weakened social networks

Reduced property values Increased crime and disorder Exacerbated by concentrated nature of

foreclosures

Data Sources Sheriff’s Sale Data

Addresses of foreclosed properties Data from Minneapolis Public

Schools Primary language spoken in home

of students Race/Ethnicity

Data from Hennepin County Assessor’s Office Homestead status

American Community Survey (2007) Demographic profiles

Homestead Status of Foreclosed Properties in Minneapolis, FY2006-FY2007

Sources: Hennepin County Sheriff Sales Data, Hennepin County Property Tax Data

61%

39%

72%

28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Non-homestead Homestead

Foreclosures in MPLS All Parcels in MPLS

Households in Minneapolis with a Child in Public School, 2007

Source: American Community Survey 2007

83.5%

16.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Public School Child Present Public School Child NotPresent

ACS 2007

Foreclosed Housing Units in Minneapolis with a Child in Public School Present, FY06-07

39.3%

60.7%

83.5%

16.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Child Present Child Not Present

Foreclosures in Minneapolis ACS 2007

Sources: Hennepin County Sheriff Sales Data, Minneapolis Public Schools, American Community Survey 2007

Households in Minneapolis with a Child in Public School by Race or Ethnicity, 2007

Source: American Community Survey 2007

0%

10%

20%

30%

40%

50%

60%

AmericanIndian

Asian Black Hispanic White

ACS 2007

Foreclosures in Minneapolis with a Child in Public School by Race or Ethnicity, FY06-07

0%

10%

20%

30%

40%

50%

60%

70%

AmericanIndian

Asian Black Hispanic White

Foreclosures in MPLS ACS 2007

Sources: Hennepin County Sheriff Sales Data, Minneapolis Public Schools, American Community Survey 2007

Households in Minneapolis with a Child in Public School by Nativity, 2007

Source: American Community Survey 2007

29.7%

70.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Foreign Born Native Born

ACS 2007

Foreclosures in Minneapolis with a Child in Public School by Nativity, FY06-07

24.1%

29.7%

70.3%75.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Foreign Born Native Born

Foreclosures in MPLS ACS 2007

Sources: Hennepin County Sheriff Sales Data, Hennepin County Property Tax Data, Minneapolis Public Schools, American Community Survey 2007

Foreign Households in MPLS with a Child in Public School that Experienced a Foreclosure by Language, FY06-07

15.4%

3.7%6.0%

65.5%

9.4%

0%

10%

20%

30%

40%

50%

60%

70%

Hmong Laotian Somali Spanish Other

Sources: Hennepin County Sheriff Sales Data, Minneapolis Public Schools

Homeowner Households in Minneapolis with a Child in Public School by Nativity, 2007

Source: American Community Survey 2007

64.1%

27.2%

0%

10%

20%

30%

40%

50%

60%

70%

Foreign Born Native Born

ACS 2007

Foreclosures of Owner-Occupied Properties in Minneapolis with a Child in Public School by Nativity, FY06-07

31.3%

64.1%

46.8%

27.2%

0%

10%

20%

30%

40%

50%

60%

70%

Foreign Born Native Born

Foreclosures in MPLS ACS 2007

Sources: Sheriff Sales Data (Hennepin County), Hennepin County Property Tax Data, Minneapolis Public Schools, American Community Survey 2007

How Does Predatory Lending Occur?

Forceful, direct marketing (supply side) Sophisticated demographic and

geographic analyses Recruitment from within the

community (“cultural broker”)

Social networks (demand side) Expectations and the role of history Trust of institutions vs. trust of

individuals

Policy Implications

Reorient focus of foreclosure prevention programs Focus on supply side and the

demand side Rebuilding trust Linguistically appropriate?

Moratorium on foreclosures? Evidence of disproportionate

impact Freddie and Fannie Political will?