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Foreclosure Crisis Built on Racial Injustice
The recession has resulted from, and contributed to, America’s racial divide.
Last week, CNN reported that Obama's foreclosure prevention plan-the one that was supposed to keep millions of Americans in their homes by giving banks incentives to refinance mortgages-has not worked. In fact, just six percent of eligible households have received assistance.
The impact of this failure is catastrophic, as millions of homeowners continue to slide into foreclosure. People of color have been hit hardest by the crisis, facing disproportionate rates of foreclosure as well as higher levels of unemployment. The recession has deepened the racial divide.
This is why it seemed odd to many when Federal Reserve Chair Ben S. Bernanke met with world bankers and collectively declared the global economy to be back on track to normal. As long as we fail to address the struggles of working people and ignore the structures of racial inequity that helped push us all into recession, we will find that a return to normal will mean very little.
Earlier this year, I traveled the country from Michigan to Arizona, Rhode Island to Washington, researching race and the recession. Near Detroit, I met Leila*, who recently lost her job as a teacher's assistant and supports her four children alone.
She was laid off late last year because of state budget cuts. Her unemployment benefit ran out and she applied for government cash assistance. A month later, her welfare checks were also cut off and she was suddenly without any income.
Leila fell behind on her mortgage payments on the house she had just moved into. She realizes now she was sold an adjustable rate subprime loan. Her house went into foreclosure. Without any other wealth to fall back on, she's not sure what will happen.
Because people of color were disproportionately saddled with predatory loans, neighborhoods of color bear the brunt of foreclosures. Black, Latino, Asian and American-Indian families have been stripped of much of the wealth they had carefully accumulated over the years. The impact of these losses will last for generations.
That people of color face higher rates of foreclosure is no coincidence. Until the 1970s, communities of color were broadly excluded from owning homes as a result of racial "redlining" practices and racially restrictive neighborhood agreements. Then Congress passed the Community Reinvestment Act (CRA) to end discrimination in lending. Suddenly redlining and racial exclusion were made illegal and people of color slowly began to access prime loans.
But in the late 1990s, Congress deregulated the mortgage industry along with Wall Street, opening the space for industry to circumvent the CRA. These were the same anti-regulatory maneuvers that made subprime securitization possible.
As the CRA was weakened and incentives to sell subprime loans grew, neighborhoods of color provided fertile ground for the sale of these faulty products. Since communities like Leila's were largely devoid of prime lenders as a result of redlining, there was little competition and the credit vacuum created conditions for the predatory sale of high-cost loans to communities of color.
The streets of central Brooklyn and Detroit filled with predatory lenders and millions of these mortgages were sold. They ultimately burst, flooding the economy with toxic assets and submerging all of us in an economic storm.
In other words, the economic crisis is built on the country's long history of racial discrimination.
Recovery must prevent families from suffering the recession's worst results and lay a new foundation to avoid the kinds of unjust structures that put us all in this mess. Only by tackling racial inequity in the economy can we ensure a stable and just recovery.
An immediate halt on foreclosures is necessary, as is modernization of the Community Reinvestment Act. Government must mandate banks to renegotiate mortgages to less than 30 percent of income and lawmakers should pass legislation allowing those facing foreclosure to rent their homes from the bank.
Fixing the broken healthcare system, which is responsible for more than half of personal bankruptcies and has pushed scores into foreclosure, ought to have happened months ago.
Meanwhile, unemployment is at a 26-year high, and it's always much higher for people of color. Stimulus job creation money should be targeted to communities of color, where joblessness is literally killing people. In all this, racial impact assessments must be conducted to ensure we're building an equitable economy.
Recovery will not mean much if we return to the "normal" economy. Let's demand an economy that is good for all of us.
*Name changed.
13 Comments so far
Show AllNow is the time to speak about reparations. This mortgage crisis could be settled by the "40 acres and a mule" scenario, but just has to be updated for the new century...
This whole commentary is a indictment on our political and justice systems. Like Dr. king said " injustice anywhere, is injustice everywhere. A system built on the constant disadvantage of non- whites has left millions of citizens with the inability to help bring us out of this mess. Our system needs to be restructured to one of opportunity and merit. The days of privilege and connections need to be left behind. We can no longer weigh our success against those we handicap. Our success will be determined by or respect for each others rights as we reap the benefits of our own rights. The days in which we have to correct things our short. We cannot fear change, we must embrace and guide change, so that our grand experiment with democracy becomes a success.
To many people have either become comfortable with their own situations or blind to how the treatment of others affects them.
witness2truth, actually both comfortable and blind.
The only recovery being experienced is for the banks and the rich.The Goldman Sachs crowd now running our economy is quite comfortable referring to a jobless recovery. Oh well, nothing is perfect. I have even heard ominous suggestions that this jobless recovery may become a permanent state. Just think. An entire country looking like Detroit. With the single exception of Wall St.
As far as Obama's health care giveaway to the industry that's been destroying us, it won't kick in for 4 years and the public won't realize it's been bamboozled for years after that. Some other corporate sellout will be holding that bag. It's all musical chairs up there inside the beltway.
It will stay this way until people wake up and refuse to vote for ANY politician that accepts corporate money. I really like the idea of plastering corporate logos on their suits. Sounds like a good campaign ad to me. With accompanying ominous music and a voice over asking who you are really voting for.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
On your first paragraph, I think that most of the country already is looking like Detroit. I would say it's worse for most of rural America that's been that way already.
On your second paragraph, it all depends on what if anything passes but if it does pass, definitely and possibly worse.
On your last paragraph, I met a goof ball who happily plastered so many corporate logos all over his car and frustratingly he gets unexpected respect and admiration and he wears a business suit with a silly hat to work. I approached during lunch by luck and asked him about all those logos on his car and he gave very lame responses about "looking like a winner and flying with those logos on". He and I got into a serious argument on health care. He calls single payer health care very "unpatriotic" and badmouths it as "loser care" ! There was no reasoning with that man after that. Maybe if more people knew those companies really well would they stone anyone with those logos all over their suits, cars, or whatever of theirs instead of saluting them !
I don't think it's race alone that's the issue but class in general. It was obvious that bailing out the banks did nothing to help any struggling homeowner whose fault wasn't his/her own. It is true that a lot of African Americans and Latinos out here in the St Louis suburbs who lived there for as many as 15 years now live in the apartments in St Louis City thanks to foreclosure hell last year ! It will definitely get worse but I think that all people of the lower and middle classes regardless of race will find themselves almost equally affected.
It's race.
When a black person walks into RE agents office, or a bank, they are treated quite differently than when a comparable income and comparably dressed white in the same situation. Please believe me, I've seen it.
"When a black person walks into RE agents office, or a bank, they are treated quite differently than when a comparable income and comparably dressed white in the same situation. Please believe me, I've seen it."
I don't doubt that, but isn't the entire business of "lending" money predatory in and of itself? Debt is crippling everyone, some more than others, but still. We're not just talking mortgages either. It's credit card debt, student loan debt, medical bills. Then there are the people who lose their homes because they can't afford to pay their property taxes. 53% of Americans are living paycheck to paycheck. Some of them may THINK they're comfortable, but they're a layoff, a firing, an argument, a divorce, away from losing it all. The Piper doesn't give a shit what color you are when he wants to be paid.
I tried to buy a house. I kept getting pushed into a $730 a month mortgage. I couldn't afford it, and they were pissed when I just walked away from the deal.
I really don't know how anyone can afford a house right now. I know I can't. But people are pushed towards it. They're told that they need a house or a car, so they take on debt to get one, make the minimum payment every month and hope the wolf doesn't catch 'em.
"I really don't know how anyone can afford a house right now. I know I can't. But people are pushed towards it. They're told that they need a house or a car, so they take on debt to get one, make the minimum payment every month and hope the wolf doesn't catch 'em."
In some place, renting can cost as much if not more than buying a condo or townhouse. I wouldn't think of buying a full house, not even single family at this point though. You can say that I sort of was pushed into buying a condo a little far out from the city where I work at. I used to live right in the city and not too far from work.
As for the credit card debt, wait until that bubble bursts. That will make the mortgage bubble look like a mild pop in pale comparison.
I don't deny that this exists and I've seen a lot of it going on in Charles County, heavily Republican suburb, but I have also seen cases of women getting treated differently from men, singles getting treated differently from married people, etc ... I am a single white woman but I do understand that race is another divide-and-conquer. I just see it as one of many.
The bankers I worked with in CA were willing to swindle anyone, regardless of race, creed or color.
However, race certainly was a factor.
When a loan agent meets a customer, the agent categorizes the customer. The more quickly the categorization gets made, the more money the agent makes.
Agents can typecast customers more quickly than get to know them. They're wrong plenty, once in a while in ways that actually cost them. But they gain more $$ by saving time.
So agents typecast customers by age, gender, race, manner of speech or dress, or whatever other clues they might come across. Part of what the agent gets out of categorization is whom he or she might fool how - "what kind of purchase the client might want."
Again, it is way faster to pick a single suggestion. First-time buyers especially feel less uncomfortable not confronted by all the relevant details and may feel more comfortable with "expert advice" than their own judgement. Of course, the agent is probably just suggesting what might sell.
The less perspective is delivered, the fewer reasons the client is apt to find to think twice.
The process was exploitative no matter what client entered, but often particularly damaging for minorities because agents identified them as people who would undergo some sacrifice to get a loan, people less likely to have made prior purchases, and, I suspect, people less prone to planning.
The agent hired to sell to the Hispanic community - on gov't orders, BTW - was directed to study FHA and HUD loans and easy-entry loans, including those that had balloon payments later.
These include some dangerous loans, of course.
As a result, the agent hired to demonstrate to regulators that the bank wanted to do business with Hispanics could do so, earn money, and demonstrate his worth by directing Hispanics into balloon payment loans co-signed by various family members.
To all appearances, even to people within the bank, this constituted authentic and proper outreach to the Hispanic community. As long as it remained profitable, everyone had plenty of motive to resist any different perspective.
But the bankers certainly did not treat hispanic clients identically to WASPy types.
Class and race go hand in hand.
"Now is the time to speak about reparations. This mortgage crisis could be settled by the '40 acres and a mule' scenario, but just has to be updated for the new century..."
I agree about the time for reparations being now, or more like 15 minutes ago, but what the author and others are failing to realize is that it's not just non-whites that are losing their homes. The system as it stands doesn't really work for most whites either.
Few people can be blamed for losing their homes, living paycheck to paycheck, going bankrupt, and not being able to pay their bills. When you only color-code poverty and economic injustice, you basically tell certain people that they deserve to be struggling and have "no excuses." The Right tells that to minorities, women, and poor and working people. Sometimes the Left says that to whites in a roundabout way. It also suggests to whites that they have nothing to worry about when it comes to the ruling class.
That's not to say that racial injustice is a myth or is no longer with us. It's living, breathing, strong, and cannot be ignored, but it is also intertwined with class injustice. That has to be acknowledged lest solidarity between working and poor people be fragmented.
I've gotten into arguments with a female friend who has 3 kids and makes around $30 grand a year who has told me that people "choose to be poor." So, a lot of people are taking that bait.
The debts of ALL working and poor Americans need to be forgiven. That along with the universal single-payer education/health care/gainful employment triple combo would solve a lot of problems and heal many wounds.
I mean, is Wall Street really looking out for my white male self? Are they? If so, where's my cut, and who can I give it to? That is of course after I pay off my own damn debts first. I'm treading water too. But I guess it's my fault in the eyes of many, from libertarians to gun-toters to identity politicians.
"She realizes now she was sold an adjustable rate subprime loan."
A little too late now I guess...
That's why I'm trying to get my debt down Jennifer, and stay put for now.