Foreclosure Mitigation Counseling in Latino Communities: Insights from Seattle, WA

The foreclosure crisis of 2007-2008 threatened to end the American Dream of home ownership for millions of households.  In response, several programs aimed at stabilizing the mortgage market and relieving the burden of homeowners trapped by unfavorable mortgage products were enacted, such as the National Foreclosure Mitigation Counseling Program (NFMC). Foreclosure counseling effectiveness has been narrowly addressed within the housing field, with scholars such as J. Michael Collins et al. (2010, 2013) arguing that the financial education provided in these programs has effectively helped households sustain home ownership, most typically by securing loan modifications. Evaluations of the NFMC have reached similar conclusions (Mayer et al 2011, Temkin et al. 2014). However, these works have not adequately addressed the effectiveness of foreclosure counseling programs in communities navigating structural barriers to housing market participation, such as communities of color. The current study addresses this gap by examining the implementation of the NFMC in a Latino neighborhood in Seattle, WA.  Using administrative data collected between 2007 and 2013, as well as in-depth interviews with foreclosure counselors, the current case study investigates the relationship between ethnicity and foreclosure counseling. Quantitative analysis results indicate that the relative risk of losing one’s home is 4 times greater if a household primarily speaks Spanish, net of other factors associated with risk of foreclosure, such as type of loan and reason for default. Interviews with foreclosure counselors indicate that the conditions under which some primarily Spanish-speaking households obtained their mortgages often rendered the loan un-modifiable, particularly in relation to the type of documents used to prove identity after the implementation of the Consumer Financial Protection Bureau (CFPB). Further, primarily Spanish-speaking households receiving foreclosure counseling are often at a distinct disadvantage during the foreclosure counseling process, despite the availability of Spanish language counseling. In comparison to prior foreclosure counseling effectiveness studies, the current study suggests that foreclosure counseling outcomes are indeed impacted by ethnicity.