Despite claims that the recent rise in housing prices is solving the nation's foreclosure and economic crises, millions of families continue to face financial problems from which they may never recover, according to research from the Haas Institute for a Fair and Inclusive Society at the University of California, Berkeley.
In a new report, "Underwater America," the group found that in 57 cities, at least 30 percent of all mortgaged homes are underwater, with nearly 1 in 10 Americans (28.7 million) living in the 100 hardest-hit cities.
Communities of color are disproportionately represented in the 151 ZIP codes studied by the group, with at least 50 percent of mortgaged homes underwater, according to the Haas Institute's report.
In 71 of the 100 hardest-hit cities, the group found that African Americans and Latinos account for at least 40 percent of the population.
"Despite home prices rising in many parts of the country, the total value of owner-occupied housing still remains $3.2 trillion below 2006 levels. Despite rising home prices, there are still some 9.8 million households underwater, representing 19.4 percent of all mortgaged homes—nearly one out of every five such homes," the group found.
The Haas Institute's report found that the legacy of predatory lending has resulted in a "disproportionately negative impact on African American and Latino Communities." The group found that from 2005 to 2009, African Americans and Latinos experienced a decline in household wealth of 52 percent and 66 percent respectively, compared to 16 percent for whites.
The disparity is attributed to homes being the largest portion of the two group's wealth, which declined from a disparate level of foreclosures against minorities. "Homeownership constituted 92 percent of the net worth for African Americans and 67 percent for Latinos, compared to 58 percent for whites," researchers said.
The eleven states with the highest number of hardest-hit ZIP codes are (in order): Georgia, Florida, Illinois, Michigan, Ohio, New Jersey, Maryland, Missouri, California, Nevada, and North Carolina.
The group offered recommendations to help improve the current housing problem for minorities, including encouraging loan holders to reduce the principal on underwater mortgages to current market values and if they are unwilling to do so, then allowing underwater mortgages to be purchased by publicly-owned or nonprofit entities that are willing to restructure them.
Additionally, local municipalities should reset mortgages to current market value, and encourage banks, Fannie Mae, Freddie Mac, and investors that own vacant, foreclosed homes to sell them to publicly-owned or nonprofit entities that can convert them to affordable housing for the local community, in lieu of selling the foreclosed properties to speculators.
The group also recommended taking vacant, foreclosed homes and turning them into affordable housing by using "reverse eminent domain" to acquire properties.