the color of money

July 31st, 2011

This policy of segregated mortgages became known as “red-lining,” and by the 1950s one in five black borrowers was paying interest at over 8%, while it was about impossible to find a white family paying more than 7%.8

And yet this economic line extends far past that generation. The fact that blacks are foreclosing at a much higher rate than whites in the current crisis was predestined by the conditions of the loans they received, as banks turn down equally-qualified blacks much more often than whites, and forced blacks to pay higher interest on their loans. Housing values are indelibly color-coded, as the average value of a white house appreciates much quicker than a black house. All of this snowballed into a collective institutional bias that cost black families at least $82 billion even before this current crisis began.9

The city of Baltimore partly captures how higher-rate loans to blacks have affected foreclosure rates, with several Wells Fargo loan officers testifying that they targeted “mud people” for “ghetto loans,” resulting in 71% of foreclosures in that city being made on black homes in recent years. And so, even when income and credit score are controlled for, across the nation blacks are more than three-times more likely than whites to have their home foreclosed and be thrown out into the streets.

America may have nominally advanced from “separate but equal,” however the reality of racial disparity still haunts the bottomlines of black mortgages and checkbooks, holding them back from fully embracing the dream we’re all supposed to share.

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