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Longstanding federal inaction in the face of widespread discriminatory mortgage lending practices helped create, and since has perpetuated, racially segregated, impoverished neighborhoods. The following commentary reviews existing research to conclude: Regulatory failure has been destructive to the goal of a racially integrated society.
Redlining contributed to racial segregation by keeping African Americans out of predominantly white neighborhoods; reverse redlining has probably had a similar result. Exploitative mortgage lending has led to an epidemic of foreclosures among African American and Hispanic homeowners, exacerbating racial segregation as displaced families relocate to more racially isolated neighborhoods or suffer homelessness.
We should do more. The complaint also alleged that Countrywide had failed to offer minority homeowners conventional mortgages for which they qualified and which they would have been offered, were they white.
Instead, lending officers systematically pushed minority borrowers into exploitative subprime mortgages, with higher rates and fees U. Many of the victims were in California, and of Mexican origin.
Those in the East and Midwest were mostly African American. Instead of denying conventional loans to qualified minority borrowers, lenders disproportionately marketed exploitative loans to these borrowers.
Not only did this marketing of risky subprime mortgages help precipitate a worldwide financial crisis, it also reinforced, and may even have intensified, racial segregation in our major metropolitan areas. Whereas redlining kept black families out of white and middle-class neighborhoods, foreclosures stemming from reverse redlining have led to the displacement of many African American and Hispanic The foreclosure epidemic essay who did manage to gain homeownership in stable middle-income communities, leaving many of them few options but to return to more racially isolated and poorer ghettos.
Minorities were targeted for risky subprime loans Subprime mortgages were designed for borrowers considered a higher risk, with higher interest payments attached to the loans to compensate for that increased risk. Some subprime loans also had negative amortization—requirements for initial monthly payments that were lower than needed to cover interest costs, with the difference then added to the outstanding principal.
Although borrowers should have been more careful before accepting loans they could not reasonably repay, this was not a transparent market. YSPs, characteristic of broker compensation systems throughout the industry, were banned by the Dodd-Frank financial reform and consumer protection bill.
The Federal Reserve issued a rule implementing the ban a year later, but borrowers who were deceived as a result of the kickback system prior to the rule have no recourse Warren ; Nguyen Brokers and loan officers at Countrywide and other institutions manipulated borrowers by convincing them they could take advantage of perpetually rising equity to refinance their loans before the teaser rates expired and take cash out of the increased equity with a share left as profit for the lending institution.
But in some cases, these mortgages were promoted and sold to African American homeowners who lived in distressed neighborhoods where there was little or no value appreciation or gain in equity—even before the housing bubble burst. In these neighborhoods, there could be no reasonable expectation that the scheme could work as promised, even if the housing boom continued for other Americans.
The lending industry seems to have systematically targeted African Americans and Hispanics for these risky subprime loans. The Countrywide complaint was based on statistical evidence of discrimination—a strong correlation between race or Hispanic ethnicity and loan terms, even after available and relevant borrower characteristics were taken into account.
The settlement agreement notes that these disparities were so stark that top officials at Countrywide were aware, or should have been aware, of the racial discrimination and yet did nothing to interfere. Perhaps the racial discrimination was so commonplace in the industry that Bank of America officials considered it routine.
Elderly African Americans were considered by bank employees to be particularly good prospects for being pressured to take out high-cost loans Memphis v. A similar suit by the City of Baltimore against Wells Fargo presents evidence that the bank established a special unit staffed exclusively by African American bank employees who were instructed to visit black churches to market subprime loans.
The bank had no similar practice of marketing such loans through white institutions Baltimore v. Data on lending disparities suggest such discriminatory practices were widespread throughout the industry at least since the late s, with little state or federal regulatory response.
As early asamong homeowners who had refinanced, lower-income African Americans were more than twice as likely as lower-income whites to have subprime loans, and higher-income African Americans were about three times as likely as higher-income whites to have subprime loans.Over two million United States households have been affected by home foreclosure (or “home repossession”) in alone, and the epidemic shows no signs of abating.
Following market downturns caused by the bursting of the dot-com bubble, mortgage interest rates were sharply lowered in the US and abroad , . Mar 05, · In an essay about the home loan crisis, Andrea Harris, president of the North Carolina Institute for Minority Economic Development, suggests that black women have suffered disproportionately.
Assessing recent federal data on subprime loans, which are a main culprit in the foreclosure epidemic, Harris says black women received far more of these loans in than white men. Proposed Solutions to the Foreclosure Crisis in America Essay example Words | 8 Pages Foreclosure, the process of claiming the defaulted property to cover the cost of an unpaid debt, has hit America like a tidal wave.
An epidemic is an occurrence of disease that is temporarily of high prevalence. An epidemic occurring over a wide geographical area is called pandemic. The rise and decline in epidemic prevalence of an infectious disease is a probability phenomenon dependent upon transfer of an effective dose of the.
The Epidemic Of Homelessness And The Impact It Has On The United States Jeff Damitz One of the sociologic problems that have always faced society is the presence of homelessness population in a percentage of societies’ citizens.
Solving the Foreclosure Crisis Essay - Even before the implosion of the stock markets in , there were foreboding signs within America’s housing market. Foreclosure signs stood in yards and fliers advertising the sale of foreclosed homes hung from light posts.