Sure things are tough. And the sad reality is they’re going to get a lot tougher. Particularly if you happen to be a Black person living in America. The thing about economic numbers is they lag years behind the actual reality. So while many of you have been suffering for the past several years, i.e. lost your home, car repo’d, laid off from your job and basically tumbled out of the middle class, the economic data has not been available to validate your dilemma.
That just ended thanks to a new study by researchers at Cornell University and Rice University titled, “Emerging Forms of Racial Inequality in Homeownership Exit, 1968–2009”. Interestingly these researchers go back four decades, and show that the
“The 1968 passage of the Fair Housing Act outlawed housing market discrimination based on race,” said Gregory Sharp, a postdoctoral fellow in Rice’s Department of Sociology and the study’s lead author. “African-American homeowners who purchased their homes in the late 1960s or 1970s were no more or less likely to become renters than were white owners. However, emerging racial disparities over the next three decades resulted in black owners who bought their homes in the 2000s being 50 percent more likely to lose their homeowner status than similar white owners.”
The term “Great Recession” applies to both the U.S. recession – officially lasting from December 2007 to June 2009 – and the ensuing global recession in 2009. The economic slump began when the U.S. housing market went from boom to bust and large amounts of mortgage-backed securities and derivatives lost significant value. During the 19 months trillions of dollars of wealth were erased, more than half of adults lost a job or saw a cut in pay or hours, and tens of thousands lost their homes.
According to Jamelle Bouie, writing about “The Crisis in Black Homeownership” for Slate, “Overall, from 2007 to 2010, wealth for blacks declined by an average of 31 percent, home equity by an average of 28 percent, and retirement savings by an average of 35 percent. By contrast, whites lost 11 percent in wealth, lost 24 percent in home equity, and gained 9 percent in retirement savings.”
Recently Citigroup, after a federal investigation, reached a settlement to pay $7 billion for risky subprime mortgages that helped fuel the Great Recession and the financial crisis. Attorney General Eric Holder said it “shattered lives”. Also last year The Justice Department reached a $13 billion deal with JPMorgan Chase & Co., the nations largest bank and also sued Bank of America for misleading investors in its sale of mortgage-linked securities.
While everyone was hurt African-Americans bore the brunt of the economic meltdown. Blacks were specifically and directly targeted by many of these lending institutions who chose to market these toxic loans. Imagine a bank, setting up a department, staffing it with high paid professionals, developing marketing collateral materials, identifying key leaders and influencers in a community, like church pastors and organization leaders, and then using all of these resources to increase profit for their institution while knowingly destroying the lives of the borrowers. This is exactly what happened. According to Beth Jacobson, a loan officer with Wells Fargo in Baltimore, her team saw the Black community as fertile ground for subprime mortgages, as working-class Blacks were hungry to be a part of the nation’s home-owning mania.
In an interview in 2009, Jabobson said loan officers pushed customers who could have qualified for prime loans into subprime mortgages. Another Tweet this! loan officer stated in an affidavit that employees had referred to Blacks as “mud people” and to subprime lending as “ghetto loans”. The N.A.A.C.P. filed a class-action lawsuit charging systemic racial discrimination by more than a dozen banks including Wells Fargo.
Sadly these new studies and settlements are too little, too late for the millions who lost their homes, their dreams and their sense of dignity. According to Bartlett Naylor, a financial policy advocate for Public Citizen which advocates for consumer interests “In the context of the damage done, the damage even described by the attorney general, we’re not even in the same ballpark“.
The researchers hope this data will lead to more analysis of the additional factors that contribute to racial disparities in losing ones home including location and household wealth.