FORECLOSURE HOTSPOTS by ABC2 News Investigator Tisha Thompson
Consumer advocates say Maryland is on the brink of a foreclosure “tsunami” that’s headed our way because as many as 1 out of 5 homes will go into foreclosure next year.
Even if you’ve been paying your mortgage on-time for years, Phillip Robinson of Civil Justice Network estimates neighboring home loses would equal $150,000 in value each time there’s a foreclosure on your block.
High-risk subprime loans, or loans which require high interest payments, are most likely to force homeowners into foreclosure, according to the Consumer Federation of America. As many as “one out of five subprime loans will go into foreclosure” next year, says Robinson.
The ABC2 News Investigators spent the last two months creating the first map of its kind found nowhere else in the nation. Using federal data on every loan in Maryland between 2004 and 2005, we teamed up with the non-profit group Investigative Reporters & Editors, Inc. (IRE) and mapped out “foreclosure hotspots.”
Our exclusive ABC2 News maps also show how neighborhoods with high minority concentrations received a high-percentage of subprime loans, giving credence to the charges made by consumer organizations that brokers and lenders “targeted” minority communities and “pushed” homeowners into loans they neither needed nor could afford.
LOOK AT OUR MAPS
Foreclosure Hotspots – State Foreclosure Hotspots – Baltimore City & Baltimore County
Home Purchase Subprime Loans – State Home Purchase Subprime Loans – Baltimore City & Baltimore County
Refinanced Subprime Loans – State Refinance Subprime Loans – Baltimore City & Baltimore County
HOW TO USE OUR MAP When you click on the links above – you will be sent to a .pdf file. Use the zoom buttons (+) and (-) to see your specific neighborhood.
You will find gray dots superimposed all over the map. Each gray dot represents a neighborhood where minorities represent more than 10% of the population. The more dots you see, the more minorities live in that area.
Compare areas like the Eastern Shore, which has very few minorities and very few subprime loans, to areas like Baltimore City, Baltimore County and Prince George’s County. Notice how Salisbury, which has a larger minority population than the rest of the Eastern Shore, is the only town on the Eastern Shore with a foreclosure hotspot. Also look at the neighborhood near your local military base. ABC2 News found the chances are good it’s a foreclosure hotspot.
HOW WE MADE OUR MAP The ABC2 News Investigators analyzed more than 1.7 million loans made in Maryland in 2004 and 2005 using data provided by the federal government. Lenders are required to report race, ethnicity, gender, income and the location of each loan as required by the Federal Home Mortgage Disclosure Act (HMDA).
ABC2 News looked at the total number of single-family, first lien, conventional loans made in Maryland in both 2004 and 2005. We then divided the loans into three categories: home purchases, home refinance and home improvement loans. Minority concentrations are based on the most recent data available from the United States Census. Investigative Reporters & Editors, Inc. (IRE) then transformed our data into a map using geographic information system (GIS) software.
The Federal Reserve splits HMDA loans into two categories: prime/near-prime loans and subprime loans. Prime or near-prime loans have interest rates that are below 3 percentage points for first lien loans, or below 5 percentage points for all subordinate loans, of the comparable Treasury yield threshold. Higher-priced subprime loans have interest rates 3 points or more above the threshold for first-lien loans, 5 points or more for all subordinate liens.
In 2005, the Federal Reserve Board noted the short-term and long-term interest rate yield curve flattened and ultimately inverted, meaning the short-term interest rates which lenders often use to set mortgage prices rose above longer-term interest rates HMDA regulations use to set “reportable” high-cost or subprime loans. This means that some of the increase in reportable loans was the result of changes in the interest rate environment and does not necessarily mean that subprime lending substantially increased. However, as the Federal Reserve noted in its HMDA guidance report in April 2006, “business practices of lenders or the risk profiles or the borrowing practices also could have affected the proportion of loans reported as higher-yield loans.”
