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..... has morphed from NAFTA job losses to the draining of wealth from the African-American community.
The hidden and dirty issue of the effect of the current "credit" crisis on Black America..... ignored by the hypocritical white media machine.
Paying a premium for being black and female
DIANE ABBOTT
Sunday, March 23, 2008
All over the world we are watching spellbound as the American economy goes through its turmoil. As major banks like Bear Stearns crash and Wall Street totters, we all know that our own economies will inevitably be affected. At the heart of the current financial mayhem are sub-prime mortgages. People who were sold these mortgages can now no longer afford to pay. But how many people know that the majority of people who were sold these mortgages were black and Latino Americans, specifically women?
DIANE ABBOTT
Sub-prime mortgages were mortgages with exceptionally high interest rates sold to people who (in theory at least) had poor credit histories and so could not afford a mortgage any other way. People were lured with initially low interest rates, but these soon soared. Until recently, the sub-prime sector had been growing at double the rate of ordinary mortgages and was seen as good business.
Specialist mortgage lenders sold this debt on to some of the world's largest financial institutions. But it was all based on the belief that US house prices would continue to spiral and people would continue to service their debts. Now the combination of a slowdown in the American housing market and rising interest rates has brought the whole edifice crashing down.
In the beginning, specialist mortgage providers like New Century Financial in America and Northern Rock in Britain collapsed. More recently the major international financial institutions like Merrill Lynch, Citigroup and UBS (who funded the mortgage providers) have posted losses of billions of pounds. Last week saw the collapse of one of the oldest investment banks in America, Bear Stearns.
It is now becoming clear that a disproportionate number of sub-prime mortgages were sold to black people. Non-white people were three times more likely to have sub-prime loans than whites. Mike Calhoun of the Centre for Responsible Lending says, "Almost half of all African-American family mortgages are sub-prime mortgages. Anywhere from one in five to one in three will lose their homes. This stands to likely be the largest loss of African-American wealth that we have ever seen, wiping out a generation of home wealth building."
The total loss of wealth for African-Americans is estimated to be between US$164 billion and US$213 billion over the last eight years. Sadly, many of the black people who were sold the high-cost sub-prime mortgages (with their variable interest rates) were people who did not have a poor credit history at all, and who could have afforded a normal fixed-rate mortgage. But the salesmen, driven by commission, ruthlessly targeted the financially unsophisticated.
As one described it, her target was anyone who "appeared uneducated, inarticulate, was a minority or was particularly old or young". Currently, the mayor of Baltimore (a largely black city) is threatening to sue a bank for singling out black neighbourhoods for high-priced sub-prime loans. Other mayors of black cities may follow.
And the majority of black people who were sold these junk mortgages were black women. Black women make up half the mortgage purchasers in the black community. But even relatively well-off black women were more likely to be offered these junk mortgages than a black man and they were five times more likely to be offered one than a white man on the same income. In effect, mortgage lenders were making them pay a premium for being black and female.
And it is these black women, most of them single heads of households, who are losing their homes in their thousands (in cities all over America) as the cost of their junk mortgages soars out of reach. It is little consolation to them, as they are cheated of their dream of home ownership, that their mass default on the mortgages has triggered a Wall Street collapse.
The hidden and dirty issue of the effect of the current "credit" crisis on Black America..... ignored by the hypocritical white media machine.
Paying a premium for being black and female
DIANE ABBOTT
Sunday, March 23, 2008
All over the world we are watching spellbound as the American economy goes through its turmoil. As major banks like Bear Stearns crash and Wall Street totters, we all know that our own economies will inevitably be affected. At the heart of the current financial mayhem are sub-prime mortgages. People who were sold these mortgages can now no longer afford to pay. But how many people know that the majority of people who were sold these mortgages were black and Latino Americans, specifically women?
DIANE ABBOTT
Sub-prime mortgages were mortgages with exceptionally high interest rates sold to people who (in theory at least) had poor credit histories and so could not afford a mortgage any other way. People were lured with initially low interest rates, but these soon soared. Until recently, the sub-prime sector had been growing at double the rate of ordinary mortgages and was seen as good business.
Specialist mortgage lenders sold this debt on to some of the world's largest financial institutions. But it was all based on the belief that US house prices would continue to spiral and people would continue to service their debts. Now the combination of a slowdown in the American housing market and rising interest rates has brought the whole edifice crashing down.
In the beginning, specialist mortgage providers like New Century Financial in America and Northern Rock in Britain collapsed. More recently the major international financial institutions like Merrill Lynch, Citigroup and UBS (who funded the mortgage providers) have posted losses of billions of pounds. Last week saw the collapse of one of the oldest investment banks in America, Bear Stearns.
It is now becoming clear that a disproportionate number of sub-prime mortgages were sold to black people. Non-white people were three times more likely to have sub-prime loans than whites. Mike Calhoun of the Centre for Responsible Lending says, "Almost half of all African-American family mortgages are sub-prime mortgages. Anywhere from one in five to one in three will lose their homes. This stands to likely be the largest loss of African-American wealth that we have ever seen, wiping out a generation of home wealth building."
The total loss of wealth for African-Americans is estimated to be between US$164 billion and US$213 billion over the last eight years. Sadly, many of the black people who were sold the high-cost sub-prime mortgages (with their variable interest rates) were people who did not have a poor credit history at all, and who could have afforded a normal fixed-rate mortgage. But the salesmen, driven by commission, ruthlessly targeted the financially unsophisticated.
As one described it, her target was anyone who "appeared uneducated, inarticulate, was a minority or was particularly old or young". Currently, the mayor of Baltimore (a largely black city) is threatening to sue a bank for singling out black neighbourhoods for high-priced sub-prime loans. Other mayors of black cities may follow.
And the majority of black people who were sold these junk mortgages were black women. Black women make up half the mortgage purchasers in the black community. But even relatively well-off black women were more likely to be offered these junk mortgages than a black man and they were five times more likely to be offered one than a white man on the same income. In effect, mortgage lenders were making them pay a premium for being black and female.
And it is these black women, most of them single heads of households, who are losing their homes in their thousands (in cities all over America) as the cost of their junk mortgages soars out of reach. It is little consolation to them, as they are cheated of their dream of home ownership, that their mass default on the mortgages has triggered a Wall Street collapse.
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