Subprime Mortgage Foreclosures by the Numbers

March 26, 2007

The rise in subprime mortgage foreclosures poses looming threats to the housing market, mortgage lenders, and homeowners across the country. The Center for American Progress released a report on the issue earlier this month entitled “From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures.”

The report outlines the problems that some homeowners are currently facing and details policy solutions that would help families deal with the crisis. According to the report, policymakers should consider:

• Federal grants to expand and enhance current mortgage assistance and foreclosure prevention programs and low-interest mortgage assistance to eligible borrowers.
  
• Federal funds to target key cities and states facing the highest risk of mass foreclosure.
  
• Provisions to ensure federal agencies assess the effectiveness of each program every three years.
  
• Strengthen programs that aid families while their mortgage contracts are renegotiated or the property is sold on the market so that the homeowners’ credit ratings are salvaged, allowing for the possibility of future homeownership.

The numbers below show that there is clearly cause for concern. We must act now to create policies that will help protect American families as they grapple with subprime mortgages.

Millions of Families are at Risk

2.2 million: Approximate number of families who may lose their homes and up to $164 billion of accumulated wealth due to foreclosure, according to the Center for Responsible Lending.

1.2 million: Number of foreclosure filings in 2006. This number is up 42 percent from 2005.

700: Percentage increase in foreclosures from 2005 to 2006.

13: Percentage of outstanding mortgages accounted for by subprime loans.

20: Percentage of bor rowers surveyed who face foreclosure due to predatory loan terms and multiple refinances.

1 in 5: Number of subprime borrowers in recent years who could have qualified for a lower-cost conventional loan.

In Our Cities Versus Our Rural Counties

26.8: Percentage of subprime mortgages in McAllen, Texas—the metropolitan area with the highest percent of subprime mortgage loans.

17.4: Percentage of rural mortgage loan originations that were classified as High APR Loans. This exceeds both the urban percentage of 15.5 percent and the national percentage of 15.6 percent.

20: Rural subprime borrowers were 20 percent more likely than urban borrowers to take out a mortgage with a prepayment penalty with a term of five years or more in 2002.

63: Percentage of rural subprime mortgage loans that imposed a prepayment penalty on borrowers with a two-year penalty period, according to a 2004 report by the Center for Responsible Lending.

500: Number of rural counties (most in central and southern regions) where one-third or more of all mortgage originations were for High APR Loans. These high rates of High APR Loans occur overwhelmingly in counties with persistent poverty rates of 20 percent or more.

Does Lending Discriminate?

1/2: The proportion of rural counties with significant rates of high-cost loans—30 percent or more—with minority populations of 33 percent or more. Most of these are counties across the Mississippi Delta region with Native American reservations and poor Hispanic American communities.

3: Factor by which black and Hispanic borrowers are more likely to receive subprime loans than white borrowers, even when ac counting for credit score.

70: Percent of black Americans in places such as Boston earning between $92,000 and $152,000 who received high-interest rate loans in 2005. By comparison, just 17 percent of whites living in the same areas received such loans.

The numbers are clear. Millions of families are coming face to face with the dangers of mortgage foreclosures. Lower-income Americans as well as black and Hispanic Americans face the biggest risk of all. If the federal government does not make a substantial effort to intervene and provide assistance, homeowners across the nation may find themselves in crisis.