SAN FRANCISCO -- Despite soaring home prices in the Bay Area, many homeowners in communities of color are dealing with a perfect storm of housing ills.

"The Bay Area has strong pockets of homeownership by people of color – in Oakland, in Richmond, in the Bayview," says Gloria Bruce, Deputy Director of East Bay Housing Organizations. But due to the number of foreclosures in recent years, she adds, "there are fewer homeowners than there used to be, and the homes are less likely to be controlled by people who live in the community."

In 2011, the Center for Responsible Lending reported that homeowners of color nationwide, particularly Latinos and African Americans, were about twice as likely to lose their home to foreclosure as their white counterparts – owing in part to the fact that these homeowners were more likely to have been targeted for subprime loans.

Today, of the 6.9 million California homeowners who have a mortgage, over 2 million of them are underwater according to foreclosure database Property Radar, meaning they owe more on their home than it is actually worth on the open market. Many of the hardest hit areas in terms of home devaluation are in communities of color. Some 46 percent of the homes in the 94607 area code of West Oakland, for example -- a historically African American neighborhood -- are currently underwater, according to real estate database Zillow.

In addition to losing money on their property, many of these same homeowners are still grappling with the economic recession in other ways. Cheyenne Martinez-Boyette, who leads the Homeownership Program at Mission Economic Development Agency in San Francisco, says that many of his clients are struggling due to "being unemployed or underemployed," leaving them unable to get back on their feet. Without the income to qualify for a loan modification, many could eventually wind up losing their homes. Ironically, if they did lose their home, many would be unable to afford a rental unit in their neighborhood due to rising property values and rents. For families with children in school, says Martinez-Boyette, relocating is especially difficult.

"We don't see a lot of affordable rentals," says Martinez-Boyette. "We have a large base of people who have lost their homes – where do they go to?"

Bruce says that with the elimination of redevelopment agencies under Governor Brown in 2011, which provided for affordable housing projects, places to live are even scarcer.

"There's increasing concern about what people are going to do," agrees Kevin Stein, Deputy Director of the California Reinvestment Coalition. "It's expensive to rent and we have an affordable housing crisis."

Investors and Cash Buyers

So, who is buying up foreclosed homes? One indicator is the dramatic increase in cash sales, which have recently accounted for over a quarter of the home sales in California, according to Property Radar. In 2007, that number was below 10 percent.

The nonprofit Urban Strategies Council found that in Oakland, investors bought nearly half of the over 10,000 homes that foreclosed between January 2007 and October 2011. Over 90 percent of the homes those investors purchased are in low-income neighborhoods.

"Investors are coming in with cash and crowding out people who want to buy [a] house because it's affordable and rates are low, and the seller might rather deal with an investor," says Stein.

Foreclosed homes that are "distressed" -- fallen into disrepair or in need of work to bring them up to code – present another challenge for prospective homeowners who rely on loans. Stein says that, for example, if a buyer wants to use a Federal Housing Administration (FHA) loan, he or she can't bid on a property that doesn't meet FHA requirements, which many distressed homes don't. Those same homes are often snatched off the market by cash-paying investors who can afford to bring them up to code. The end result is a diminished stock of affordable housing for buyers who are looking to be owner-occupants.

Foreclosed properties in communities of color are more likely to be in distress and left vacant, as banks and lenders are less likely to maintain foreclosed properties in communities of color, according to an investigation by the National Fair Housing Alliance.

"A lot of local people are really priced out of buying a home," says Bruce. "People with deep pockets can make cash offers, and the average local home buyer can't compete."

"The average middle class family just cannot afford to buy a home that's decent, let alone low-income individuals," she says.

Bank Malfeasance and Scammers

Thanks to the California Homeowner Bill of Rights, which went into effect in January, there is one bright spot in the landscape: both Stein and Martinez-Boyette say that they've seen a recent decrease in homeowners being foreclosed on while they are in the process of obtaining a loan modification -- a practice known a "dual tracking" -- which the Homeowner Bill of Rights prohibits.

But the fact remains that the largest mortgage servicers continue to deny loan modifications to homeowners who are qualified to receive them. Over 60 percent of federally certified nonprofit housing counselors and legal service lawyers surveyed by the California Reinvestment Coalition earlier this year said that the largest mortgage service companies continue to do this, while over half of counselors reported that the banks are offering no clear explanations for the rejections.

The same study found that in many cases, clients who spoke little English were unable to speak to their servicers in their native language or through a translator.

Martinez-Boyette also continues to see mortgage loan scams. Recently he's seen "realtors who are trying to pawn themselves off as lawyers," and they typically target clients with limited English proficiency.

Martinez-Boyette cites the case of one family that had hired a realtor who had falsely identified himself as a bankruptcy attorney. The realtor was charging the client an ongoing fee to assist with a loan modification, despite the fact that the client was ineligible for a loan modification due to lack of income.

For stories of Bay Area homeowners and tenants who have been helped by free legal advice, see the stories of the Castillofamily, the Camelofamily, and the Jonesfamily.