17457

W e know chat the mortgage crisis is wreaking havoc on the srock market , on the housing industry, and on our

economy as a whole. But there are twO million voiceless victims of this crisis about whom we hear little. Largely ovec the next two years, an estimated two million children will be directly impacted by the mortgage crisis as

theif families lose theif homes due to foreclosures. These children are not just losing theif homes, but they also risk losing theif friends, schools, and in many ways , theif childhood.

ACKNOWLEDGING THE PROBLEM When foreclosures fo rce children from theif homes, theif education is disrupted, their peer relat ionships crumble, and the social networks that support chern are fractured. Indeed, their physical health, as well as their emotional health and well-being is placed at risk. As a result , our attention mUSt rum to the unintended and often unnoticed impact of the credit crunch on our nation's children and their education.

The Center on Responsible Lend ing projectS rhat one Out of every five subprirne mortgages that has originated in the last two years will go into foreclosure. The silent sufferers of these foreclosures are; the 2 million chi ldren and youth who are losing their homes,

according to analysis of First Focus Fellow Jul ia Isaacs (see text box). Her estimate is based on projected foreclosures of 2,26 million single-family homes, and is likely to be low because it does not include those children being evicted ftom rental units that are going inco default, nor does it include child ren whose parents default on convemionalloans.

Across the country, school districts are seeing spikes in the number of homeless children entering their classrooms, much of which is being attributed to the mortgage crisis. For example, as of April 1 of this year, schools in Cleveland, Ohio served more than 2,100 homeless students-a 30 percent increase from last year. Schools in Fairfax: County, Virginia, had served 1,356 homeless studencs as of

April. With twO more months left in the school year, they are on track ro far exceed rhe 1,405 students served last year, l

EDUCATIONAL IMPACTS OF MOBILITY Research shows that children who experience excess ive mobiliry, such as those impacted by the mortgage cris is, will suffer in school. The National Assessment of Educational Progress (known as the Nation's R eport Card) has found that students with tWO or more school changes in the previous year are half as likely to be profic ient in reading as their stable peers.l Math performance can also suffer, as a government study found mobile third grade students to be nearly twice as likely to perform below grade level in math, as compared with those who had not changed schools. 3

Not only do mobile students do worse in reading and math, they are also more likely to be held back and eventual ly drop Out. A U.S. government study fou nd that th ird-graders who have changed schools freguen tly are 2.5 t imes more likely to repeat a grade than their peers.4 Other researchers have found that school and residential changes can reduce the chances that a student will graduate by more than 50 percent. ~

BEHAVIORAL ISSUES IN CHILDREN We should not be surprised to learn rhat student mobi lity is also associated with poor and delinquent behavior. W hen students are forced to change schools, some children may try to fade into the background, while others will get into fights at rhe new school in order to "fit in."6 One study found that freguent movers were 77 percent more likely than chi ldren who have not moved ro have four or more behavior problems.7

Another study, tracking 4,500 ypung people in California and

Qtegon from middle school thtough high school, found that attending several different elementary schools increased the likelihood of violent behavior in high school by 20 percen t.8

CHILD HEALTH CONSEQUENCES The mortgage crisis also places a child's physical health at risk. As families receive their foreclosure notices, they are forced into housing that, while less expensive than the homes they have los t , are still beyond their means. One study found that working families spending more than half of the ir income on housing have

THE SILENT SUFFERERS Of THESE

fORECLOSURES ARE THE ESTIMATED

2 MILLION CHILDREN AND YOUTH

WHO ARE LOSING THEIR HOMES.

less money available than other

families to spend on such cntcial items as health care and health insurance.9 Stable housing has also been shown to correlate with other health outcomes, from better nutrition to healthier body weighr.1D

POLICY SOLUTIONS The mortgage crisis is more than a blow to our economy. It is crippling our children, their education, and as a result, the nation's future. And while our government is working to allevia(e the financial damage caused by thi s calamity, the impact on the nation's children is going unnoticed. As economists focus on solving [he problem, policy makers must make a concerted effort to mitigace the damage of this disaster on our young people.

In Congress, there are several actions that could be quickly

taken to help diminish the impact of this crisis on America's

ch ildren. First, providing an infusion of funds to school

districts across the country through the McKinney-Vento

Homeless Education prog ram would help ensure that students

who ate forced co move from theit homes do not also have to leave thei r schools. McKinney-Vento allows homeless students

co stay in their schools even if they are forced to move outside

the school district. In addicion, the program provides homeless

students with a variety of supports, such as tutoring, school

supplies, and counseling, among others, to help stabilize their

education even though the rest of their lives are fraught with

uncertainty.

Addi tionally, Congress shou1d act swiftly to pass the National

Affordable H ousing Trust Fund Act. The mortgage crisis was

ESTIMATING THE NUMBER OF CHILDREN

IMPACTED BY THE MORTGAGE CRISIS

· Julio Isaacs, Child and Family Poli cy Fellow at the Brookings Institution and First Focus Fellow, h-as deve loped an estimate of the number of ch ildren impacted by the mortgage crisis, summarized in the table below. Her estimate is based on the Cenl~r on Respom.ible lending's-projeclion that one out of every five subpri/!le mortgages made in 2005 and 2006 goes into . foreclosure . In lotaLthe Center on Responsib le Lendi ng projects a 10 101 of 2.26 million foredosLires on single·.family homes, with the bulk occurring in 2008 and 2009,~IAs noled in a recent. report by Pew. Cha ri table Trusts , this pro jection.represents 1 in 33 current homeowners in the U.S. a nd is in li ne with on esfimat~ of 2 million potential foreclosures prOVided-by Mark Zondi, chief economist of·Mbody's economy.com -:in fiis February 2008 testimony before the U.S~ House o f Representotives Finan_cit;J1 Services Comm illee. 12

How many children 'Iive in the 2.26 million homes projected to be in caused in part by the nation's lack of affordable housing - a

foreclosure? Although mortgage data does not contain information an the situation growing more dire as home loans become increasingly

presence of chi ld ren, th e Home Mortgage Disclosure Act .(HMDA) does limited. The National Affordable Housing Trust Fund Act,

. provide information on the roce and. ethn icity of homeowners' taking out high-already passed by the House of Representatives, would create an ... ~ "'i ~ p'riced \oan·~ .. The Center on Responsible Lentling's analysis of HMDA dota -estimated 1.5 million units of affordable housing over the next '. finds that 17 percent·oF.sobprime loons orig in-aled .in 2005 were to Latino

10 years . Th is long-term solution will help to prevent this C homeowners, and l~ percent were 10 Africa·n-Amer"icans. 13 Applying the~e chap ter of our nation's history from repeating itself. percentages 10 the 2.26 mi ll ion homeowners suggests that 388,000 la tina

CHILDREN SHOULD NOT BE AN AFTERTHOUGHT Adults caused the mortgage crisis. Children are suffering

because of it . T he situation will no t be solved over nigh t , but

we can help to ease its impact. As we lower ineetest rates, spend

our stimulus checks, and provide support to the horne building

industry, le t us not forget that the only hope oue country has of st reng thening our economy over t he long term is through

supporting the home buyers of [he furure.

PhiJJip Lovell is tile Vice President of Education Policy fOr First Focus. He can be reached at pflllJip]@)firsrfocus.I1ec.

homeowners, 344,0.00 block homeowners, 9:nd 1.53 mi llion wh ite/other ' homeowners Wi ll -lase their homes to -fo reclosu re, as shown in the second colu mn of the table' below. 14

The' next step is to est'imate th e number of children, by race/ethnicily, in_each home. Recent Cens'us Bureau data (from the 2006 American Community Survey) fi~d~_c.hi lgren present in 62 percent c{ Latino households in awner~ occupied homes with outstanding mortgages, and 60 average of 2.08 children in sJch_homes with ch ildren. Applying these statistics for 011 Latioo homeowners fa those in default results in a lotal of 504,600 latino chi ld ren directly impacted by the fore"dosure crisiS:15 Black andwhite/olher homeowners hove fewer children per hO:usehold than Latino homeowners, a~d th e some metbbdology results in 281,200 black children and 1.17 million

· white/ather children, as shown in tgble below.

,. Combining the r9c;; iol!elhoic groups, a total of 1-.9~2 million children or~ · estimateq to be o irectly impacted by the mortgage crisis. 16

ESTIMATED NUMBER OF CHILDREN IMPACTED BY THE MORTGAGE CRISIS.

LATINO

BLACK

ALL OTHERS'

SUBPRIME LOANS BY RACE/ETHNICITY (PERCENT) (0)

17.2

IS.2

67.6

PROJECTED FORECLOSURES (b) ,

388,000

HOUSEHOLDS WITH CHILDREN (PERCENT) (e) ••

62.4

343,700 ·~~-44.7

AVERAGE # OF CHILDREN IN SUCH HOUSEHOLDS WITH CHILDREN (d)

2.08

1.83

.84

PROJECTED NUMBER OF CHILDREN DI­RECTLY IMPACTED BY THE FORECLO­SURE CRISIS e 504,600

281,200

'1,166,200

.. 1100:0 ~.:;.'< ~r 2/2S8,400-~·~~-~L '" "-___ ...;..~- ........ - ~k -. ., "._ .

-:- "-1 T.952,660 ~ _. __ ... ~. 1·'

NUMBERS MAY NOT ADD DUE TO ROUNDING. (0) Percentages are ca lculated from figures in -Drain on Homeowners hip, - CRt Islue Paper No. 14, March 2007. (b) Total pra jOClCd Foreclosures are "am rhe Cenler for Resporuibla lendillQ publica~alls cited in Footllote 11 ("The Impad of Court-Suparvisad Modilicafions on Subprime Foreclosures: United Stores,· and -losing Ground.' Estimotad loradOll,lres by roce OFe based on !he percentages in lint colu mn. (c) Brookings onoly~ is 01 2006 da ta /rom the Americon Community Strrvey. (d) Ibid. (e) Children _ (b) x (c) x (d) .

"Among Owner.Qccupied Homes with O utstanding Mortgages

l I

I

ENDNOTES:

I These data were provided by the National Association for the Education of Homeless Children and Youth, representing the homeless liaisons serving homeless children in school districts throughout the co~ntry.

2 Rumberger, Russell, The Causes and Consequences ofSrudenr Mohiliry, Journal of Negro Education. Vol 72, No.1, pp. 6-21 , (2003).

3 GAO (General Accounting Office) Report, Elementary School Children: Many Change Schools Frequently, Harming Their Education, GAO/HEHS-94-45 , Washington, DC (1994).

4 Ibid.

s Rumberger, 1993.

6 Rhodes, Virginia, Kids on the Move: The Effects of Student Mobility on NCLB School Accountability Ratings, Peon GSE Perspectives in Urban Education, Vol. 3, Issue 3 (Spring 2005).

, GAO, 1994.

8 Rumberger, 1993 .

9 Lubell, Jeffrey , Rosalyn Crain, and Rebecca Cohen, Framing the Issues - The Positive Impact of AffOrdable Housing on Health, Center for Hous ing Policy, Washington, DC Guly 2007).

I II Ibid.

11 'fhe 2.26 million projection represents cumulative foreclosures of single-family homes secured by subprime mortgages between 1998 and 2006; the bulk of the loans were made in 2005 and 2006 and are projected to foreclose in 2008 and 2009. For original project ion (2.2 million homes) and detailed methodology, see Schloemer, Ellen, Wei Li, Keith Ernst, and Kathleen Keest, Losing Ground: Foreclomres in the 5ubprime Market and Their Cost to Homeowners. Center for Responsible Lending (December 2006). For updated projection (2.26 million homes), see The impact of Court-Supervised Modifications on Sub prime Foreclosures: United 5mtes, Center for Responsible Lending (February 2008).

12 Pew Charitable Tmsts, Defiwlting on the Dream. States Respond to America's Foreclosure Crisis, (April 2008); and Mark Zandi, Writtcn Testimony before the House Financial Services Committee of ~he United House of Representatives (February 26, 2008).

13 Ccmcr for Responsible Lending, Sub prime Lending: A Net Drain on"Homeownership, CRL Issue Paper No. 14 (March 27,2007).

14 This analysis assumes the same racial/ethnic breakdowns for all subprimes originated 1998-2006 as observed in 2005; in addition, it follows the Center or Responsible Lending's assumptioJ? that defau lt rates are similar across racial groups.

1~ The assumption that the average number of children in foreclosed homes is the same as in all homes with outstanding mortgages may provide a conservative estimate of children impacted by the mortgage ctisis; analysis of defaults in the past suggests that households with more children arc more likely to be delinquent on housing payments than households with few children. Canner, Glenn, Stuart Gabriel and J. Michael Woolley, Race, Dc/auic Risk }Ind j'\'£orcgage lending: A 5cudy olthe FHA and Conventional LOi:lflllftlrkets, Southern EconomicJournal, Vol. 58, No.1 Guly 1991) pp. 249-262.

16 Note that this estimate does not include children being evicted from rental units going into default, or children whose parents default on conventional loans.

ACKNOWLEDGEMENTS: First Focus would like to thank Julia Isaacs of the Brookings Institution and Barbara Duffield of the National Association for the Education of Homeless Children and Youch for their assistance in developing this brief.

Firsr Focus is a bipartis,w advocacy organization chac is committed co making chIldren and their mmJlies a priority in federal policy and budget decisions. To learn more visit wWlv'/irsdoclIs.na.