The Foreclosure Crisis Reshapes America

The foreclosure crisis has hit families across America, with marriages disintegrating in the face of economic hardship. Janis Bowdler is deputy director of the Wealth Building Policy Project at the National Council of La Raza. Last week, the council published a survey of 25 Latino families and how they are affected by the current economic crisis. Joel Kotkin, distinguished presidential fellow at Chapman University in Orange, Calif., talks about the effect of foreclosures on families. He is the author of The Next Hundred Million: America in 2050 , a look at how the nation will evolve in the next four decades.

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LYNN NEARY, host:

And now, we continue our conversation on how the housing crisis is reshaping American society. Joining us now to discuss how families are weathering the economy storm is Joel Kotkin, author of The Next Hundred Million: America in 2050, a look at how the nation will evolve in the next four decades. He is a distinguished presidential fellow at Chapman University in Orange, California and an adjunct fellow at the Legatum Institute in London. Also joining us is Janis Bowdler. She is the deputy director of the Wealth Building Policy Project at the National Council of La Raza. Last week, her organization published a survey of Latino families and how they are affected by the housing crisis. Good to have you both with us.

Mr. JANIS BOWDLER (Deputy Director, Wealth Building Policy Project): Thank you for having me.

NEARY: All right, Janis, let me start with you. Latinos have been very hard hit by foreclosures. Why is that? Can you explain that first of all?

Ms. BOWDLER: Sure. Well, I think what you see in the Latino community is really a perfect storm of several things having come together. We started with a crisis that was really driven by predatory lending and unsuitable mortgage products in the market. But its mushroomed with the high rate of unemployment. So, now you have bad mortgage products and high unemployment which has hovered at around 13 percent for Latino families for more than a year now. And families just can't keep up with their mortgage under that kind of condition.

NEARY: And your study looked specifically at the affect of foreclosures on the Latino family. First of all, are Latinos affected differently than any other American families by this?

Ms. BOWDLER: Well, I think a lot of things are actually the same. NCLR funds a network of over 50 foreclosure-prevention providers in Latino communities. So, we had our pulse on the community, and we wanted to see what were the impacts specifically on Latino families and on their children. But I think many of the things that we found are actually resonating far and wide, not just within the Latino community.

NEARY: For example.

Ms. BOWDLER: Well, for example, foreclosure brings a lot of financial instability, which leads to parental infighting and the results of foreclosure of having to move multiple times, change schools, the tax on your social networks. Those are things that are particularly acute in the community, but a process that all families that go through foreclosure are dealing with.

NEARY: Now, Joel, your book is actually fairly optimistic. And I wonder when you hear people talking that the impact of the foreclosure crisis on America, do you sometimes think there's an overreaction?

Professor JOEL KOTKIN (Presidential Fellow, Chapman University; Adjunct Fellow, Legatum Institute; Author, "The Next Hundred Million: America in 2050"): Well, I mean, it's certainly not an overreaction if you're stuck in it. And certainly, we have a foreclosure crisis, which I think is widespread. I mean, one reason I think Latinos maybe more affected, also, is they were very heavily represented in most recent buyers. In other words, people who bought towards the top of the market were much more vulnerable than people who had been there a long time. This recession has been very tough on young families in particular, and also very tough on groups like Latinos who were very involved in the construction industry.

Now my perspective from the next hundred million is if you project further out, there will be an enormous amount of demand for new housing and for new construction. And I think as the country builds out of this, I think Latinos who really were at the forefront of the growth in the last 10 years, I think will go will get back there. But certainly, there will be many scars and many lessons that will be learned, some of which may be positive in terms of helping people transition from, you know, from the very things that got them in trouble in the first place.

NEARY: And in terms of the housing crisis, how is it playing out differently among other racial and ethnic groups, in terms of the...

Prof. KOTKIN: Well, I mean, it's really more about age than anything else...

NEARY: Mm-hmm.

Prof. KOTKIN: ...with Latinos. Younger people bought more recently - people who bought more recently were much more affected. I mean, that was one big affect. And then the other big effect is Latinos are very heavily represented in manufacturing and construction, and those two sectors have been hammered in the recession. So they were hit one, by being late to the market, and secondly, they were hit by the fact that the sectors that they were overrepresented in were hit harder than other sectors. So I think those are sort of the key factors.

NEARY: And if you're joining us, this is TELL ME MORE from NPR News. And we are speaking to author Joel Kotkin and National Council of La Raza's Janis Bowdler about how the recession is affecting families across America. Janis Bowdler, I think you wanted to add something there?

Ms. BOWDLER: Yeah, I just want to follow-up on that. I agree with what Joel is saying. Those things are certainly true about young families and the kinds of fields of employment that the community was involved in. But it's also true that Latino and African-American families were heavily overrepresented in the subprime market, even when they had good credit, even when they had a co-borrower and down payment. So we know there was targeting and some discrimination in the lending process that resulted in the community getting loan products that were more likely to fail and put them in an even more tenuous position, making it harder for them to withstand financial emergencies such as losing their job.

NEARY: Janis, you know, it's been a long-held belief in this country that buying a home is the road into the middle class. I think that's something Latinos believed in pretty strongly. Is that still the right message?

Ms. BOWDLER: I think it is the right message. In fact, for many families, the equity that you build in your home is going to be the path to more a secure retirement, the way you're going to send your kids to college. I think the problem is that we have to get back to a place where we do really smart and sound underwriting. If you were to walk into the door of one of our housing counselors, they would tell you that it's not just a matter of you buying a home, but when you buy a home. And they help families walk through a series of steps that get them prepared for home ownership.

During the bubble years, what we saw is those counselors actually getting competition from mortgage brokers and lenders out there who said, ah, why wait to do savings? Why wait to build up your credit score? I can get you into a home now. Just sign here.

NEARY: Joel Kotkin, what do you see, looking towards the future in terms of homeownership in this country? Is it what we should be telling people to do in terms of trying to get to the middle class, save for retirement? Or should we be relying on things like rentals for a longer period time, as I think people did in the past? What's your take on that?

Prof. KOTKIN: Well, I think, still, I agree very much that homeownership long term is important - for lots of reasons, not just, you know, financial, but in terms of the stability, the environment for kids. But I do think that you will see some changes - which I think would be good changes - in that people will begin to realize that they have to be much, much more conservative about how they approach buying a house. And also understanding as - you know, I remember my parents moving to - buying a house in Long Island in 1958. And we didn't have furniture in the house for at least two-three years.

And I think that the notion that when you buy a house, that you have to understand you are sacrificing other things, I think is an important lesson. And I think that, frankly, I think many immigrant families - Latino, Asian and others - may actually be able to learn that lesson more easily because of the values that many of the families have. But I think that there was a false promise - not just subprime mortgages, but the idea that you could buy and borrow based on your house. I think that was very disastrous. So a lot of people not only had mortgage debt, but huge credit card debt.

NEARY: All right, I'm going to have to stop you right there, Joel. Thanks so much for joining us.

Prof. KOTKIN: Thank you.

NEARY: Joel Kotkin is the author of "The Next Hundred Million: America in 2050," a look at how the nation will evolve in the next four decades. And he's a distinguished presidential fellow at Chapman University in Orange, California, and a adjunct fellow at the Legatum Institute in London. He was kind enough to join us by phone from his home in Los Angeles. Janis Bowdler is a deputy director of the Wealth-Building Policy Project at the National Council of La Raza. Thanks so much for joining us today.

Ms. BOWDLER: Thank you.

Prof. KOTKIN: Thank you.

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