Is the mortgage industry bankrupting Black America?
There is a racial dynamic to the Wall Street meltdown/bail out: minorities, especially blacks, who were lured - nay, railroaded - into subprime mortgages.
Now, to add insult to injury, blacks are being scapegoated by some lawmakers. At a House Financial Services Committee hearing on Thursday, Michelle Bachmann (R-MN) denounced the Community Reinvestment Act (CRA), a law that compelled certain financial institutions to ensure that every creditworthy American has an equal opportunity to secure a mortgage, as the major cause of subprime lending.
Bachmann’s comments received a swift rebuke from fellow Minnesota congressman Keith Ellison:
“This is the height of chutzpah,” said Rep. Keith Ellison in a scathing statement on Tuesday. “To suggest that the greatest financial crisis we face since the Great Depression was caused by legislation that was created to help PREVENT low-income individuals from assuming high-cost, subprime loans that have caused the crisis today is absurd.”
“To suggest that struggling families trying to keep their homes brought down the ‘Titans of Commerce,’ ‘The Masters of the Universe’ on Wall Street, is ludicrous. To suggest someone who is raising three children while holding down two minimum-wage jobs on a high school education was able to stall one of the greatest economic engines on earth needs their head examined,” Ellison said.
And empirical data back Ellison’s assertion. A number of studies show that CRA has in fact decreased predatory lending in minority neighborhoods and that banks subject to CRA regulations were less likely to offer subprime loans.
Bachmann and others are in the right arena, but there target is incorrect. It’s not the community reinvestment act, or blacks and other minorities themselves, who have caused this financial meltdown. No black family forced a mortgage broker to give them a subprime loan for a home they couldn’t afford. These families were TARGETED by the Mortgage Industrial Complex. Those loaning the money knew they wouldn’t be able to pay it back - unless banking is full of idiots now. They wanted to make a fast buck, NOW, and damn the consequences. From The Nation magazine:
But the disaster is depressingly man-made. And this neighborhood reveals a deeply troubling dimension of it, one that will echo long past the recovery everyone hopes will soon come: for black America, the “mortgage meltdown” looks less like a market hiccup than a massive strip mining of hard-won wealth, a devastating loss that will betray the promise of class mobility for tens of thousands of black families.
As the mortgage crisis unfolded, observers of all political stripes repeated a boilerplate line: the “affordability products” that have flooded the lending market in recent years–from subprime to interest-only loans–have done more good than bad by fueling a surge in black and Latino homeownership. But while minority homeownership may have grown in the short term, the long-term outlook promises quite the opposite, as southwest Atlanta painfully illustrates.
First-time homebuyers have originated less than a tenth of all subprime loans since 1998, according to a 2007 Center for Responsible Lending analysis. As recently as 2006, just over half of all subprime loans were refinances of existing home loans. The expected foreclosure toll from these loans will outpace the ownership gains by nearly a million families, the center estimates.
Add predatory lending to the lack of financial savvy and good money advice in the black community, and you have the recipe for decimation of an entire slice of the population.
Tags: African American, black, predatory lending, subprime