I'm guest-blogging at Credit Slips this week about our new bankruptcy report, consumer debt, and more. Below is an excerpt from one of these posts.

Yesterday, I posted a chart highlighting changes in refinance lending in Chicago between 2008 and 2009.  It showed lending doubling in predominantly white communities but dropping by over 40 percent in communities of color. To me, this chart illustrates my concerns about the directions in which these respective communities might be heading in the wake of the foreclosure and economic crisis. Whatever the reasons are behind the drop in conventional lending to communities of color, it ultimately means that they will face significant challenges to recovery.

It’s hard to feel lonely in Roxie King’s house. The walls are packed with row upon row of pictures of Roxie’s parents, two children, twenty grandchildren, and other loved ones celebrating various stages in life. On a recent visit, Roxie proudly showed Woodstock friend Bobbi Ball of Partners In Community Building, Inc. and me around her clean and cozy ranch-style home of 37 years near Midway Airport. Given her good cheer, it was hard to believe that, just last year, she was at risk of losing this home.

I'm guest-blogging at Credit Slips this week about our new bankruptcy report, consumer debt, and more. Below is an excerpt from one of these posts.

Woodstock Institute recently released a report called Paying More for the American Dream V: The Persistence and Evolution of the Dual Mortgage Market in collaboration with six other research and advocacy organizations from around the country.  The report is the fifth in an annual series that looks at systematic inequalities in the housing finance system and their impact on lower-income neighborhoods and communities of color.  I pulled data used in this report to create the chart below.  To me, this chart, more than perhaps any other data visualization I’ve seen, illustrates the different directions in which America’s white communities and its communities of color are headed.

Bankruptcy filers in African-American neighborhoods choose potentially risky Chapter 13 more often than filers in white communities

Women in Cook County’s African-American neighborhoods file for bankruptcy at a disproportionately high rate, a new report from Woodstock Institute found. The report also found that bankruptcy filers in African-American communities are far more likely to choose Chapter 13 bankruptcy over Chapter 7, a trend that may indicate limited economic benefits of the bankruptcy process to filers in these communities.

Pop quiz: what do these three stories have in common?

Access to mortgage refinance loans sharply declined in communities of color and increased substantially in predominantly white neighborhoods, according to a report released today by a multistate coalition of groups.

These trends underline growing concerns about the dramatically divergent fortunes of communities of color that have been hit hard by the foreclosure and economic crisis and white communities where the impact has been less severe.  These concerns are even more pronounced in light of recent proposed changes in mortgage financing that would likely make access to conventional refinance lending even more difficult and costly and likely disproportionately affect access to loans in communities of color.

Banks repossess nearly 2,800 homes in Cook County in the first quarter of 2011

Completed foreclosure auctions in Cook County increased substantially from the final quarter of 2010 to the first quarter of 2011, adding thousands of properties to the County’s vacant property inventory, say new data released today by Woodstock Institute. The 10.5 percent increase in completed foreclosures from the fourth quarter of 2010 to the first quarter of 2011 was likely caused by a resumption of foreclosure activity after the end-of-year pause in many servicers’ foreclosure processes due to the robo-signing scandal.

While I was in Washington, DC, last week for the National Community Reinvestment Coalition conference, the Congress passed legislation cutting the federal budget for the current fiscal year (Oct. 1, 2010-Sept. 30, 2011). As hundreds of conference attendees conducted Capitol Hill visits on April 14, the day the U.S. House of Representatives voted on the measure, we were shocked to learn that one of the many programs gutted was the entire $88 million line of the Housing and Urban Development (HUD) budget for housing counseling.

We admit it: it’s been quiet around the Woodstock blog this week. That’s because a majority of our staff was out most of last week enjoying another productive National Community Reinvestment Coalition (NCRC) Annual Conference in Washington, DC. At NCRC, we shared ideas and learned new ones from community investment practitioners from Hawaii to Boston, discussed pressing issues with the Illinois congressional delegation, and got up-to-date on new strategies, programs, and financial products during the workshops.

We at Woodstock Institute have long argued that, in order for loan modifications programs to effectively prevent foreclosures on a broad scale, they need to include a component of reducing the principal owed on underwater homes. In fact, we bring it up pretty much every time we talk to policymakers, regulators, and the media when they ask us what needs to be done to fix the foreclosure mess. Principal writedowns became more relevant—and controversial—than ever when it was recently revealed that Attorneys General may include a principal writedown component to their settlement with loan servicers over improperly preparing foreclosure documents. A common criticism of principal writedown is that by offering to reduce the amount a borrower owes, it would encourage other borrowers who owe more than their home is worth but could afford to continue making payments to default on their loans so they too could get their principal reduced—or, as economists call it, moral hazard. That concern is not unreasonable, but it shouldn’t stop us from pursuing principal writedowns for one simple reason: they work.