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Foreclosure fallout hits 'communities of color' especially hard: $2 trillion

By Catholic Online (NEWS CONSORTIUM)
October 25th, 2012
Catholic Online (www.catholic.org)

Having your home foreclosed upon is a traumatic event, and is one that is felt by your neighbors, who face losing value on their own homes. According to a new accounting by a consumer advocacy group, the economic impact of homeowners who live near a foreclosed property comes to about $2 trillion.

LOS ANGELES, CA (Catholic online) - The Center for Responsible Lending estimates that more than half of that "spillover loss" occurred in communities of color. The authors of the study define this term as where more than 50 percent of the residents are Hispanic, African-American or otherwise non-white. According to the authors, those losses reflect the high concentrations of foreclosures in those neighborhoods.

Examining the indirect impact of foreclosures on properties within one-eighth of a mile of a home in foreclosure, the study concluded that the total loss of home equity since the housing market collapsed is more like $7 trillion. This figure doesn't include additional indirect costs.

"Communities with high concentrations of foreclosures lose tax revenue and incur the financial and non-financial costs of abandoned properties and neighborhood blight, while homeowners living in close proximity to foreclosures suffer loss of wealth through depreciated home values," the report's authors wrote.

The study found that homes near a foreclosed property lost or will lose an average $21,077 in wealth or about 7.2 percent of their home value. In minority neighborhoods, the families lost an average of $37,084 or 13.1 percent of their home value.

The group combined statistics collected by the government, Mortgage Bankers Association and a private database maintained by Lender Processing Services, a company that provides services to mortgage lenders.

The authors of the report also noted that over time, some of the losses inflicted by the spillover effect of foreclosures will be offset by rising home prices.

The estimate covered foreclosures started between 2007 and 2011.

The pace of home new foreclosure filings has been falling this year, falling seven percent in September compared with the previous month and down 16 percent from September 2011, according to RealtyTrac, a research firm.

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