The new numbers from RealtyTrac suggest that housing markets in many are areas are returning.

“Nationwide and in most markets it appears builders are planning to ramp up activity that will help offset a drop in foreclosure starts, but there are some markets where a jump in both building permits and foreclosure starts in the first quarter indicate the scales will tip more heavily in favor of supply of homes for sale in the coming months — both new homes and foreclosures,” said Daren Blomquist, vice president at RealtyTrac. “On the other extreme there are some markets where both building permits and foreclosure starts are down dramatically, indicating that there will be no reprieve from the shortage of homes for sale in those markets in the near future.”

The comparison between new construction and foreclosure activity is interesting because it may point to more housing supply than is generally believed to be available.

On one hand, new construction can plainly be seen as an addition to the housing stock. On the other, foreclosures do not necessarily imply fewer available homes — the houses themselves could be perfectly fine but distressed only in the sense of money and mortgages. Combine foreclosures and new home construction and the result in many communities could be a large stock of available properties. If it turns out that housing supply is greater than generally believed that the rise in home prices could slow, especially in overbuilt areas.

RealtyTrac also found:

• Nationwide single family building permits increased 27 percent from a year ago in the first quarter to the highest first-quarter total since 2008. Meanwhile U.S. foreclosure starts in the first quarter decreased 27 percent from a year ago to the lowest quarterly level since the second quarter of 2006.
• The majority of building permits in the first quarter were for single-family homes (64 percent of total permits), followed by 5+ unit multi-family properties (33 percent). Overall multi-family building permits increased 23 percent from a year ago.
• States with the most single family building permits in the first quarter were Texas, Florida, North Carolina, California and Georgia, all of which posted double-digit percentage increases from a year ago. All these top states also posted decreasing foreclosure starts from a year ago, although Florida foreclosure starts were down just 1 percent.
• States where both single family building permits and foreclosure starts increased from a year ago included Nevada, Washington, New Jersey, Maryland and New York.
• Cities with the most single family building permits in the first quarter were Houston, Oklahoma City, Austin, El Paso and Fort Worth. Of these top five, all except for Austin posted decreasing foreclosure starts during the same time period. Austin foreclosure starts increased 19 percent.
• Cities with the most foreclosure starts in the first quarter were Miami, Las Vegas, Chicago, Fort Lauderdale and Orlando, with Las Vegas, Fort Lauderdale and Orlando posting increases in foreclosure starts from a year ago. All five cities posted increases in single family building permits from a year ago.
• Cities where both single family building permits and foreclosure starts increased at least 10 percent from a year ago in the first quarter included Las Vegas, Seattle, Raleigh, N.C., Reno, Nevada, and Boca Raton, Fl.
• Cities where both single family building permits and foreclosure starts decreased from a year ago in the first quarter included San Antonio, Albuquerque, Fresno, Bakersfield (both in California) and Greensboro, N.C.

“We are currently experiencing a feeding frenzy in the Reno area for inventory. While the increase of foreclosures and building permits will bring some much-needed relief in the future it will unfortunately be far from a feast,” said Craig King, COO of Chase International brokerage covering the Lake Tahoe and Reno, Nevada markets. “We are particularly feeling the heat for properties under $350,000. Those properties are receiving multiple offers within days of hitting the market so the builder and foreclosure inventory will be a blessing but far from an answer to the inventory shortage here.”

“Listings in the Oklahoma City area are down dramatically from this time last year by 18 percent and home prices are climbing. The increase of building permits in the area is a welcomed sign that some relief is on the way in terms of inventory. However, even with the increase of REO’s coming onto the market it will not be enough to solve the inventory shortage here,” said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty in Oklahoma City and Tulsa. “With Boeing and Northrop Grumman moving into the area there is an increasing need to get these new single family homes completed and onto the market as quickly as possible.”

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This is something very new in the history of the Internet, a recognition that the Internet marketplace is now real and no longer requires a sales tax advantage.

The subject of an Internet tax is fairly complex: Who pays the tax, the seller or the recipient? Must the seller be located in a given state, just the buyer or both?

In 1992, the Supreme Court decided in Quill Corp. v. North Dakota that the state could not collect a sales tax because Quill had no physical presence in the state. This was a great decision for mailers and cataloguers and in general but did not immediately mean much to Internet merchants because they had virtually no marketplace presence at the time.

Minimal Online Tax

The result of the Quill decision is that online retailers had the opportunity to grow with few worries about state taxes. The general rule was that as an Internet retailer you paid taxes in the state where you were physically located and if you were located somewhere overseas you likely paid nothing.

At first the tax-exempt status of online sales was not a big problem. Yes, state and local tax revenues were being lost but the numbers were tiny and a new business was being created. Over time, however, online shopping became more accepted meaning there was less growth for bricks-and-mortar outlets and smaller tax collections for the states.

A number of recent top chain retailers are now gone and more will inevitably join them. As the chains become smaller or disappear the demand for mall space and strip center locations will fall, not good news for commercial real estate holders. In my area, as an example, Circuit City locations have closed.

The problem with retail outlets is that everything they carry can be found online. Why buy locally when you can purchase online, often with no sales tax or delivery charges?

Forbes describes the situation as the “Coming Death of the American Shopping Mall.”

“I don’t think we’re overbuilt, I think we’re under-demolished,” Daniel Hurwitz, president and CEO of DDR Corp., told the CoStar Group.

“Online retailers are relentlessly gaining share in many retail categories, and offline players are fighting for progressively smaller pieces of the retail pie< says Jeff Jordan, writing in The Atlantic Monthly. “A number of physical retailers have already succumbed to online competition including Circuit City, Borders, CompUSA, Tower Records and Blockbuster, and many others are showing signs of serious economic distress. These mall and shopping center stalwarts are closing stores by the thousands, and there are few large physical chains opening stores to take their place. Yet the quantity of commercial real estate targeting retail continues to grow, albeit slowly. Rapidly declining demand for real estate amid growing supply is a recipe for financial disaster.”

Now, by a vote of 69-27 the Senate has passed the Marketplace Fairness Act. The legislation is supported by bricks-and-mortar shopping outlets, no surprise there. However, it is also supported by large online retailers, companies that can easily afford the logistical headaches of tax collections from thousands of governmental agencies.

Will the proposed legislation pass the House and agin support from the President? This is to be seen. But what seems obvious is that in some way universal online sales taxes are going to shop up on most larger sites, and probably sooner rather than later.

The next step after passage of a universal online tax will be to have a central pool which will collect online taxes from all Internet retailers with revenues above $1 million and then make distributions to the states, perhaps on a per-capita basis. Such a pool will solve the complexity, collection and distribution problem with a single online address.

As to shopping malls themselves, look for well-located centers to become, er, well-located residences with up-scale shopping and restaurants nearby, and plenty of parking.

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The argument for the make ‘em higher crowd goes like this: During the mortgage meltdown many of the worse loans required only small down payments and some financing required none, therefore the cause of the foreclosure mess was the lack of higher down payments.

There is a wisp of truth to this view: Many nontraditional loans required very little down — if anything — and many of those loans resulted in foreclosures. However, the so-called “affordability” loan products which flooded the market had a number of troubling characteristics such as negative amortization and massively-increasing mortgage payments.

“If our goal is to prevent foreclosures,” Paul S. Willen, a senior economist and policy adviser at the Federal Reserve Bank of Boston, told the New York Times, “I can’t think of anything more effective than requiring a down payment.”

But, inconveniently, it turns out that loans with little down actually have attractive foreclosure levels.

Look at foreclosure rates for the fourth quarter of 2012. According to the Mortgage Bankers Association the foreclosure inventory rates for prime fixed loans was 2.10 percent, prime ARM mortgages were at 6.68 percent while FHA loans were at 3.85 percent and VA loans were at 2.08 percent.

Notice that the MBA release looks at fixed and adjustable prime mortgages but combines the results for FHA and VA loans. Obviously, if FHA and VA were divided into fixed and adjustable products we would have a better basis for comparisons. That said, it’s interesting the VA loans — including VA adjustables — have lower foreclosure levels than prime, fixed-rate financing.

An FHA loan, of course, typically is available with 3.5 percent down while VA financing can be had with no down payment money up front.

Many of the products that were the cause of the mortgage meltdown are simply no longer with us in any great numbers. Option ARMs, interest-only mortgages and loans without documentation are rarely seen today. Without such loans we can see that foreclosure rates have tumbled significantly.

For instance, before the mortgage meltdown the foreclosure rate was typically about 0 .4 percent of all loans outstanding. Since the introduction of Wall Street reform the foreclosure rates has been about .1 percent.

Marketplace experience shows there is no need for higher down payments. Increasing the cash required from borrowers is not the key to fewer foreclosures, instead the path to fewer foreclosures is two-fold: First, have sensible, proven financial products without surprise payment increases or hidden costs. Second, carefully underwrite loan applications.

For months the real estate industry has been complaining about a shortage of homes to sell, an inventory which is too small. Raise down payment requirements and the inventory problem will vanish while home prices will fall. Why? Because there will be fewer buyers in the market looking for homes.

————————————————

Posted originally by the author on the Huffington Post, May 2, 2013. Copyright Peter G. Miller, All Rights Reserved.

Why Mortgage Down Payments Should Be Smaller is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: adjustable, adjustable rate mortgage, conventional, down payment, FHA, fixed, Foreclosures, loan, mortgage, mortgage rates, VA

Maryland, for example, is the nation’s wealthiest state in terms of household income and yet foreclosure activity – default notices, scheduled auctions and bank repossessions — rose 199 percent this April when compared with April 2012. The reason? All foreclosure actions must go through the court system.

Some will look at the Maryland numbers — and the numbers in other judicial states — and blame the rising foreclosure activity levels in those jurisdictions because lenders generally cannot move as quickly to foreclose. In fact, the problem has not been with the court system, rather it has been caused by efforts to avoid wrongful foreclosures as a result of robo-signed claims and questions regarding who actually has the right to foreclose when notes are endorsed in blank or lost.

“The April numbers indicate that the pig is moving through the python when it comes to deferred foreclosures in judicial foreclosure states,” said Daren Blomquist, vice president at RealtyTrac. “Foreclosure starts have been increasing for several months in many of the judicial states, and now that increased volume is showing up in the second stage of the process: the public foreclosure auction. Scheduled foreclosure auctions in judicial states jumped to a 30-month high in April, evidence that lenders are serious about moving forward with completing the foreclosure process — either through repossession or sale to a third-party investor at public auction.

“Meanwhile, foreclosure starts are bouncing higher in a handful of non-judicial states where servicers are adjusting to legislation designed to prevent improper foreclosures,” Blomquist continued. “This includes Nevada, Washington and Arkansas, where foreclosure starts have been increasing on an annual basis since late 2012, along with Oregon and California, where foreclosure starts are still down from a year ago but have been moving steadily higher in recent months.”

High-level findings From The Report

According to RealtyTrac the latest foreclosure activity report contained the following highlights:

• Scheduled judicial foreclosure auctions (NFS) increased 22 percent from March to April and were up 31 percent from a year ago to the highest level since October 2010 — a 30-month high.
• Scheduled foreclosure auctions increased from a year ago in 15 of the 26 judicial or quasi-judicial foreclosure states, including Maryland (199 percent increase), New Jersey (91 percent increase), Ohio (73 percent increase), Oklahoma (57 percent increase), and Florida (55 percent). Scheduled foreclosure auctions reached a 68-month high in Ohio, a 31-month high in Maryland, a 27-month high in New Jersey, and an 18-month high in Oklahoma.
• Scheduled non-judicial foreclosure auctions (NTS) in April were down 7 percent from March and down 43 percent from April 2012 to the lowest level since December 2005 — an 88-month low.
• A total of 70,133 U.S. properties started the foreclosure process in April, down 4 percent from the previous month and down 28 percent from a year ago.
• Despite the nationwide decline, 22 states reported increasing foreclosure starts from the previous month, including New Jersey (138 percent increase), Connecticut (46 percent increase), Texas (37 percent increase), Georgia (35 percent increase), Oregon (16 percent increase), and California (13 percent increase). Foreclosure starts reached a 36-month high in Connecticut, a 27-month high in New Jersey, and were up on a monthly basis for the third consecutive month in California after hitting a 90-month low in January, when new legislation impacting the foreclosure process took effect.
• Lenders repossessed 34,997 U.S. properties in April, down 20 percent from March and down 32 percent from April 2012 to the lowest level since July 2007 — a 69-month low.
• Lender repossessions (REO) decreased from a year ago in 37 states and the District of Columbia in April, but some notable exceptions where REO activity increased from a year ago included Washington (164 percent increase), Maryland (98 percent increase), Oklahoma (19 percent increase), and Ohio (17 percent increase).
• Nevada posted the nation’s highest state foreclosure rate for the second month in a row despite a 15 percent monthly decrease in foreclosure activity.
• Akron, Ohio, posted the nation’s highest metro foreclosure rate in April thanks in part to a 147 percent annual increase in overall foreclosure activity. One other Ohio city (Columbus), along with five Florida cities, Las Vegas, Myrtle Beach, S.C. and Chicago also registered top 10 metro foreclosure rates in April.
• As of the beginning of May, A total of 11.3 million mortgages nationwide were seriously underwater, meaning combined amount of mortgages secured by the home was at least 25 percent more than the estimated value of the home. That represented 26 percent of all outstanding mortgages, but was down nearly 1.5 million from the 12.8 million seriously underwater mortgages in May 2012.

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Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, lenders can avoid virtually all liability by making what are called “qualified mortgages” or QMs. In basic terms, such loans include all fully-documented, 30-year FHA, VA and conventional mortgages which have points and fees that do not exceed 3 percent of the loan amount. Such loans are generally available with little down which makes them extremely attractive to purchasers, especially first-time buyers.

The results of the Dodd-Frank rules have been dramatic: Prior to the mortgage meltdown the typical foreclosure rate across the country was .4 percent. Then, with the creation of toxic loan products which were sold between 2000 and 2008, foreclosure rates soared.

With the introduction of Dodd-Frank standards the foreclosure level for loans made since 2010 has fallen to .2 percent for Freddie Mac and .1 percent for Fannie Mae according to Lawrence Yun, chief economist for the National Association of Realtors. Of course, lower foreclosure rates mean less risk and less risk means lower mortgage rates.

Now, under new rules announced by the Federal Housing Finance Agency (FHFA), the governmental agency that oversees Fannie Mae and Freddie Mac since they were nationalized, the two big mortgage buyers will no longer be able to purchase loans which do not meet basic QM standards.

The new rules — which go into effect January 10, 2014 — will protect borrowers by limiting the market for non-standard financing. Since most lenders have been following the QM standards since the passage of Dodd-Frank the directive from FHFA will not be a new regulatory hurdle.

At the same time the new FHFA directive will also protect taxpayers by assuring that Fannie Mae and Freddie Mac do not purchase loans with excess risk. So far, taxpayers have loaned $187 billion to Fannie Mae and Freddie Mac of which roughly $50 billion has already been repaid.

According to FHFA:

Beginning January 10, 2014, Fannie Mae and Freddie Mac will no longer purchase a loan that is subject to the “ability to repay” rule if the loan:

___ is not fully amortizing (meaning Fannie Mae and Freddie Mac will not purchase loans which require a huge balloon payment),

___ has a term of longer than 30 years, or

___ includes points and fees in excess of three percent of the total loan amount, or such other limits for low balance loans as set forth in the rule.

“Effectively,” says FHFA, “this means Fannie Mae and Freddie Mac will not purchase interest-only loans, loans with 40-year terms, or those with points and fees exceeding the thresholds established by the rule.”

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Technorati Tags: 30-year, down payment, Fannie Mae, FHFA, Freddie Mac, interest-only, loan, mortgage

That’s because VA loans maintain the industry’s lowest foreclosure rate despite the fact that 9 in 10 buyers put $0 down. In fact, they’ve been the safest loan on the market for the last five years, including prime loans.

The VA foreclosure rate for Q4 2012 was 2.08 percent, slightly lower than the rate for prime loans (2.10 percent) but way lower than the rate for FHA loans (3.85 percent) and for fixed-rate subprime loans (9.28). This nearly 70-year-old home loan program also rattled off 14 consecutive quarters with the industry’s lowest delinquency rate before recently ceding the top spot to prime loans.

What accounts for the safety and security of this no-down payment program? There are a few contributing factors worth exploring.

Residual Income

Along with a more relaxed debt-to-income ratio requirement, the VA utilizes a unique income standard for residual income. This is basically how much money you have remaining each month after paying major revolving installments like a mortgage, a car loan and the like.

The standard varies by where you live and your family size. A family of four in California needs at least $1,117 left over each month to meet the residual income requirement. In the Midwest, that same family needs only $1,003 remaining.

The VA also links residual income to DTI ratio. Veterans whose DTI ratio is greater than 41 percent must meet a higher standard of residual income in order to pursue financing. The combination of these income-related requirements helps gives lenders a clearer sense of whether a veteran can truly afford the mortgage.

VA Commitment

Five years ago the VA set out to tackle foreclosure and default issues among its borrowers. About 300 department employees work exclusively on helping veterans keep their homes. They’re in constant contact with servicers and lending institutions who have a homeowner on the edge.

The VA also pushes servicers to work with veterans by offering modifications, forbearance and other foreclosure avoidance mechanisms. Nearly 300,000 veterans have avoided foreclosure over the last five years because of the VA’s concerted effort, which has saved taxpayers more than $8 billion.

Veterans Themselves

Finally, veterans and military borrowers themselves deserve a good deal of credit. On the whole, this is a demographic that strives to stay current on bills and make good on financial obligations. There’s a sense or order and structure ingrained in many military households, and it often carries over into civil and financial responsibilities.

__________________

About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.

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Technorati Tags: foreclosure, loan, military, mortgage, residual income, VA, vet

The big question raised by the report is just how long rental expenses can continue to rise while incomes continue to fall.

“Median household income,” according to the Census Bureau, “was $50,054 in 2011, 1.5 percent lower in real terms than the 2010 median, 8.1 percent lower than the 2007 (the year before the most recent recession) median ($54,489), and 8.9 percent lower than the median household income peak ($54,932) that occurred in 1999.” (parenthesis theirs)

A new report from the Center, a part of the National Housing Conference, shows that “working renters saw their housing costs rise by 6 percent from 2008 to 2011, while their household incomes fell more than 3 percent.”

In comparison, those who owned saw an effective decline in housing expenses as interest rates, property taxes and homeowners insurance premiums have generally fallen. This happened because the Federal Reserve has forced down interest rates and lower property values since 2007 also mean declining property taxes and reduced property insurance bills because both expenses are based on home values.

“While the economy pushed both owners’ and renters’ incomes down, the shift away from homeownership is pushing rents up due to increased demand, said report co-author Maya Brennan. “What we’re seeing with the rental market is not explainable by population trends alone—it clearly reflects the movement of former homeowners into rentals as well as delays in home purchases by current renters, but this increase in rental demand has not been matched by an increase in supply. This imbalance leads to rising rents in markets across the country.”

Major findings from the report, entitled Housing Landscape 2013, include:

___ Nearly one in four working households spends more than half of its income on housing. The share of working households with a severe housing cost burden increased significantly between 2008 and 2011, rising from 21.8 percent to 23.6 percent.

___ Declining incomes have exacerbated housing affordability problems for working renters. The median housing costs of working renters rose nearly six percent between 2008 and 2011 while their median incomes fell more than three percent.

___ Severe housing cost burden was most preva­lent among working households earning less than 30 percent of area median income (AMI). Eight in ten working households earning less than 30 percent of AMI (but working an average of at least 20 hours per week) were severely burdened in 2011, a much higher share than for other income groups. Increases in housing cost burdens occurred primarily among working households with incomes at or below 50 percent of AMI, but even some working households earning between 51 and 120 percent of AMI are faced with severe housing cost burdens.

For more, see: Housing Landscape 2013

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Technorati Tags: affordability, corporate, executive, income, National Housing Center, own, ownership, profits, Rent, taxes, tenant, wages

Probably not.

Until a lender has all of your information, you have nothing

Advertised mortgage rates are snapshots based on the rate that could be offered to only the most highly-qualified applicants – people with perfect credit, lots of home equity or big down payments, buying their primary homes, which are traditionally-built single family homes. Anything but this profile results in higher fees or mortgage rates. Here’s what lenders need to know before they can give you meaningful mortgage quotes:

• Property value / sales price
• Home equity / down payment
• Property location
• Property use (primary residence, vacation house, rental)
• Property type (single family residence, condo, manufactured home, coop)
• Your credit score

The difference between the rate for a cash-out refinance at 85 percent of a home’s value for a borrower with a 660 FICO and a home purchase with 35 percent down and a borrower with a 740 credit score is about full percentage point! If there isn’t a halo floating over your head, chances are good that advertised rates don’t apply to you. Make sure that all lenders have all your information so you can compare their offerings fairly.

Until you have a locked loan, you have nothing

Any time you get a mortgage quote from a lender, you’re getting a snapshot – the mortgage rate that is available at that time.

Mortgage rates change all day long, because they are based on mortgage-backed securities, which trade like stocks. And just as stock prices move up and down constantly, mortgage rates change also. That’s why it’s important to get competing quotes during the same time frame – a quote from Lender A on Monday can’t be compared to quote from Lender B on Wednesday.

While your loan is in process, you may lock your mortgage rate at any time. You’ll contact your lender (a good loan officer should be keeping you apprised of mortgage rate changes), and agree on a program, interest rate and loan fees. The lender should issue you a new set of disclosures stating the rate, costs, and rate lock expiration.

• If anything “material” changes during the loan process (for example, if the property doesn’t appraise for its sales price, your credit rating drops or you change loan programs) the lender has to issue you new disclosures.
• Your final mortgage documents should contain no surprises – the costs and rate should match what was disclosed on the most recent Good Faith Estimate provided to you by your lender (within tolerances specified by law).

If your final documents don’t match the last Good Faith Estimate, don’t sign them until you get a satisfactory explanation or mistakes (if any) are corrected. When you close your loan, your loan officer should be there with you or available by phone. Even better, you can request that closing documents be sent to you a few days before closing, so that you can review them and resolve any questions before closing time.

Did My Mortgage Lender Pull A Bait And Switch? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: application, Closing, loan, lock-in, locked, mortgage, quote, settlement

What is a zero-zero mortgage option? And why would you like to see one? Let me explain.

Imagine you see a loan at 3.5 percent and 1 point or 3.625 percent and no points. Which is the better loan?

A “point” is equal to one percent of the loan amount. If we have a $100,000 mortgage a point will cost the borrower $1,000 at closing. Since the lender is getting $1,000 up front and making a $100,000 loan, the effective interest rate in this example is 3.581 percent.

Why? With a $100,000 loan at 3.5 percent the monthly payment for principal and interest is $449.04 over 30 years. However, if $1,000 is paid up front than the initial debt is $100,000 but the amount advanced is really $99,000. If the monthly cost for a $99,000 loan is $449.04 then the interest rate is 3.581 percent over 30 years.

The combination of interest rates and points is often very confusing. Properly used points can help a borrower manipulate the interest rate and that can be a valuable tool when financing or refinancing real estate. For example, if you expect to be a long-term owner it can be advantageous to borrow at a lower rate by paying points upfront. Alternatively, if you expect to quickly sell then paying points upfront is a waste of money.

When trying to compare different loans one useful tactic is to ask the lender to provide “par” pricing; that is, a rate quote with zero points.

ZERO-ZERO Mortgage Quotes

The CFPB proposal would’ve gone much further than par pricing. Had it been approved the CFPB rule would have required lenders to offer borrowers the option of a loan where the interest rate could be seen with zero points AND zero fees. A zero-zero interest quote – whether for an FHA mortgage, a VA loan or conventional financing – would appear higher than the quotes normally advertised because it would include a provision for points and fees.

Although the CFPB decided against forcing lenders to offer a zero-zero quote option there is no reason why borrowers should not get a quote at par, in other words the interest rate expressed with zero points. This is not the same as a zero-zero quote but comparing loan options on the basis of par pricing can provide a straight and simple analysis of your loan choices.

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Technorati Tags: compare, conventional, FHA, loan, mortgage, par, pricing, quote, VA, zero-zero

But while much of the foreclosure crisis now seems over and done that is not the case for everyone. The odds are overwhelming that blacks and Hispanics will continue to feel the sting of the foreclosure crisis for some time to come. Why? Not because of less income, though such groups have less income than whites, but because there is also a wealth gap.

“Income inequality understates the size of the economic gap between whites and minorities in the United States,” says a new study from the Urban Institute. “In 2010, whites on average had two times the income of blacks and Hispanics, but six times the wealth. Analyses of wealth accumulation over the life cycle show that the racial wealth gap grows sharply with age. Wealth isn’t just money in the bank, it’s insurance against tough times, tuition to get a better education and a better job, savings to retire on, and a springboard into the middle class.”

The problem here is really threefold:

First, there are large income gaps in the US. While the average household income was $50,054 in 2011 not everyone was likely to have the same earnings: According to the Census Bureau, Asian households had the highest median income ($65,129) versus $55,412 for non-Hispanic white households, $38,624 for Hispanic households and $32,229 for black households,

Second, many of the people who were sold subprime loans actually qualified for better mortgages. For instance, according to the Wall Street Journal, 61 percent of all subprime borrowers qualified for FHA loans, VA mortgages and conventional financing in 2006. (See:Subprime Debacle Traps Even Very Credit-Worthy, December 3, 2007).

Michael Hudson, in his exceptional book, The Monster, explains how subprime lenders aimed their financial products at minority households, especially elderly black women. In other words, much of the financial crisis was both unnecessary and directed toward minority households.

Third, black and Hispanic households have less wealth and therefore less ability to weather economic downturns, according to the Census Bureau. “There is extraordinary wealth inequality between the races. In 2010, whites on average had six times the wealth of blacks and Hispanics. So for every $6.00 whites had in wealth, blacks and Hispanics had $1.00 (or average wealth of $632,000 versus $103,000).

“The income gap, by comparison, is much smaller. In 2010, the average income for whites was twice that of blacks and Hispanics ($89,000 versus $46,000), meaning that for every $2.00 whites earned, blacks and Hispanics earned  $1.00.”

For details, see: Less Than Equal: Racial Disparities in Wealth Accumulation.

Wealth Gap Creates More Foreclosures and Short Sales is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Asian, black, foreclosure, Hispanic, household, income, minority, short sale, subprime, wealth, White