That headline was suggested by the friend who emailed me this little gem from the New York Times:
The recent surge in homeowner defaults nationwide, generated by lax lending practices during the real estate boom, has officials bracing for a range of problems that often accompany foreclosures. Some municipalities, including Cleveland and Buffalo, are trying to make lenders responsible for abandoned properties to ward off crimes like arson, drug use and prostitution.But the civil suit that officials in Baltimore are filing in United States District Court may presage another type of litigation against lenders by municipalities facing shortfalls in their budgets.
In the suit, Mayor Sheila Dixon joined with the City Council to ask that the court bar Wells Fargo from charging higher fees to black borrowers. Many of these borrowers paid more under the bank’s subprime lending program, designed for less creditworthy consumers, and are more likely to default on their loans.
I hear a lot of complaints that borrowers were shifted into rates "higher than their credit profiles" merited. But the articles never actually tell me what I want to know, which is: were these borrowers charged higher rates than their loan packages merited? Your FICO score is just one part of the package; others include things like assets and income, and the size of the loan relative to the house value. The sad fact is that, even in a (previously) decaying urban core like Baltimore, blacks are likely to have lower assets and income than whites. So far I've seen little evidence that, taking these things into account, banks are discriminating against minority borrowers.
I have no doubt, mind you, that some unscrupulous mortgage brokers have put clients into inappropriate mortgage packages. Mortgage brokers work for the lender, not for you, and you forget this at your peril; unfortunately, financially unsophisticated first time buyers may never have learned this in the first place, and their social networks may not have that information to impart.
But if I were an evil conspirator who wanted to ensure that poor borrowers have a hard time accessing conventional credit, this sort of lawsuit is exactly the strategy I'd take.
MM wrote: But if I were an evil conspirator who wanted to ensure that poor borrowers have a hard time accessing conventional credit, this sort of lawsuit is exactly the strategy I'd take.
Maybe, in the realm of the unspoken, that's part of the goal here: to gain credibility by being publicly seen as taking a civil rights stance, while quietly making sure that lenders will never again be tempted to blight those areas where the somewhat desirable homes are, by giving poor people sufficient credit access to try them out.
Personally, though, I think posturing and stupidity are sufficient to explain the city's actions in this case.
Two politically incorrect facts partly explain why a larger percentage of blacks ended up with sub prime mortgages:
1) Blacks, on average, are culturally less prone to save and more prone toward conspicuous consumption, thus leaving them with less savings on average and poorer borrowing profiles.
2) Blacks, on average, have lower IQs than other groups, making it more difficult for them to understand the details of complex mortgages.
Megan, there's no solution to the problem you identify-- which is not to say you aren't right to identify it.
On the one hand, tight credit can clamp down hardest on the poor (including many blacks), leading to redlining and discrimination in banking.
On the other hand, loose credit can lead to the subprime crisis, payday lending, and all sorts of other bad deals for the poor.
The one thing I would say-- prompted, in part, by Harry's offensive and racist comment above-- is that antidiscrimination laws need to be enforced. We must remember, for instance, that one reason why many blacks can't present as favorable a loan package as whites is because the future potential appreciation in the value of their homes is limited because of racism-- specifically, the unwillingness of whites to buy homes in neighborhoods with more than a certain percentage of blacks. Thus, race discrimination gets built into home values and force blacks into the subprime market or denies them home mortgages at all in times of tighter credit.
Dilan,
And please tell how your proposed anti-discrimination laws will control for the price of homes that these fictious "whites" refuse to buy?
Your reply is just as racist as Harry's, albeit in the other direction. Still just as bad, perhaps worse, because your mis-diagnosed problem will lead to "answers" which don't solve the real problem at all.
Nearly everyone, not just "whites" don't want to move into neighborhoods with violence. Nobody but the desparate wants to move into a neighboor hood where the houses are in shambles and the crime rates are high.
Plenty of blacks, hispanics, asians, jews, russians, etc avoid certain housing areas. Nothing to do with the color of the skin of their neighboors but the content of their character (not all but some bad apples ruin it for everyone else)
When will people stop focusing on the color of people's skin and start focusing on their character?
Some blacks are bad, some whites are bad, some mexicans are bad. That more blacks commit more violent crimes on whites than vice versa does not make all black bad, but it does make nearly everyone, whites included, to be leary of staying in primarily black dominated communities. Again the color of their skin is not at issue here. It's the way some people act and then blame others for their actions and seek to do everything under the sun to solve the problem, while dancing around the real issue.
2) Blacks, on average, have lower IQs than other groups, making it more difficult for them to understand the details of complex mortgages.
Posted by Harry | January 8, 2008 12:22 PM
Wow...just wow. Isnt ironic the person comes in to dismiss racism makes a racist comment...which kind of justifies the proof of racism he was trying to dismiss.
Harry's comment is offensive because it explicitly calls black people stupid. No doubt about that.
But the entire liberal pogrom against the fictitious concept of "predatory lending" is based on precisely that premise. Is it any less offensive because it's implicit rather than explicit?
Your reply is just as racist as Harry's, albeit in the other direction.
I thought of replying on the merits to your point, but this sort of thing ticks me off quite a bit.
A lot of conservatives need a refresher course on what the word "racism" does and doesn't mean. And by saying this, I am not saying that some conservative critiques of anti-racism don't have some merit, i.e., some people really are too quick to scream racism, too quick to attribute all racial disparities of any sort to it, etc.
But "racism" does not refer to affirmative action programs, even if you disagree with them. It does not refer to enforcing anti-discrimination laws, even if you disagree with them. It does not refer to identifying potentially adverse effects of public or private sector activities on minorities, even if the person is being paternalistic.
"Racism" refers to beliefs that one race is inferior or superior, or advocating discrimination against people because of such a belief or because of a negative stereotype about the fitness to achieve, or inherent aptitude, or propensity to be a criminal, or some other aspect tied to a particular racial group.
Conservatives who are insufficiently concerned with actual, old-fashioned racism have for the last 30 or so years sought to redefine the term so that it is no longer applied to those on the right but is rather applied to those on the left who want to better the conditions of racial minorities in society (whether or not you believe their programs will actually accomplish that goal).
Simply put, if you think that the big exemplars of racism in public life are people like Jesse Jackson or Al Sharpton, you really don't know what the term means and should refrain from using it until you learn.