The Assault on the Black Middle Class
Sub-prime lending was racially targeted and demolished decades of progress made by America's most diligent and striving people of color. How will America make amends?
August 4, 2009
When my mom describes it all now--10 months after she walked away from her house of 14 years--she sounds sort of crazy to me. I make her explain again and again, because the depth of her denial about the situation she faced is hard for me to understand. But that's the thing about losing stuff. Whether it's your keys or your life savings, it's tough getting to that moment when you realize something's gone for good.
My mother, Carolyn White, and her husband, Earl, spent the first eight months of 2008 haggling with Countrywide Financial (now acquired by Bank of America), trying and failing to get their sub-prime loan modified into something they could pay. She and Earl, like so many other casualties of the sub-prime disaster, had refinanced their home to take out equity. Then the rate exploded, increasing their monthly payment by hundreds of dollars.
"It was like talking to a brick wall," she complains with a resigned if annoyed tone, which once rang with fury instead. Several months into the effort, when it became clear things weren't going to work out, they started looking for a rental. "Earl had gotten to the place where it didn't matter to him," my mom explains. "But I was fighting it tooth and nail to the end. Even when I was packing to move, I was thinking, 'Well, they're going to come up with something, and we can just unpack.'"
She'd already picked out a townhouse in her same neighborhood, on Indianapolis' solidly middle-class northwest side. She'd dutifully selected three favorites, actually, ranking them and putting in applications. Yet, she never expected to move. Even after they'd finally walked, my brother had to shout her down to keep her from going back and tidying up the property she'd abandoned. "I just couldn't see myself leaving my house," she says.
At age 63, she's starting over on her American dream. A rented townhouse. New, smaller furniture. Family photos edited down and re-hung. A few framed wildlife prints as reminders of the Wyoming retirement home that had once felt within reach. They're middle-aged grandparents and middle-class by all outward appearances. But they're facing life like a couple of hard-pressed newlyweds.
They're of course not alone. More than 10 percent of all mortgages were in default as 2008 ended. We logged more than 800,000 foreclosure filings in the first quarter of 2009, according to the Center for Responsible Lending, which projects 2.4 million this year.
These are big, daunting numbers with which we're all becoming drearily familiar. But less familiar is the fact that this carnage has disproportionately hit people of color, particularly those who were old enough to have built up some equity when the sub-prime boom exploded.
In 2006, African American borrowers at all income levels were three times as likely to be sold sub-prime loans than were their white counterparts, even those with comparable credit scores. The Pew Hispanic Center reports that 17.5 percent of whites took out sub-prime loans but that 44.9 percent of Hispanics and 52.5 percent of African Americans took out sub-prime loans. Blacks like my mom, who could qualify for conventional loans, were targeted for sub-prime ones, which generated higher fees for the lender and higher costs and risks for the borrower.
Many of the places hit hardest by the first foreclosure wave--south Florida, the urban Midwest, cities like Oakland, Phoenix, Atlanta, and Detroit--had dense pockets of black and Latino homeowners, where slowly accumulated equity could be stripped away in ill-conceived refinances. As a result, one in 10 black borrowers is expected to foreclose, compared to one in 25 whites. And a United for a Fair Economy study last year estimated that black and Latino borrowers will absorb at least $164 billion in losses, or about half the nation's overall foreclosure toll.
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