No Such Thing As An Opinion!

Black-friendly money lending policies actually harmed them! Who would have thunk it?


During the late 1990s and early 2000s, the administrations of Presidents Clinton and Bush promoted lending policies with the explicit intent to provide more mortgages to blacks, in order to raise their rate of home ownership.

Who would have thought that during 2010, the government policies would not only
fail to raise the rate of home ownership among blacks but they would actually result in a decrease in home ownership among blacks, and an increase in blacks' financial hardship!

How do I know this was likely the case? Well, I don't even need to see all of the stats. It's just common sense.

In order to increase home ownership among blacks and hispanics, lenders had to begin providing mortgages to those they normally wouldn't.  Blacks and hispanics appeared in disproportionately higher numbers among those with poor credit profiles: low credit scores, low income, low assets.


When people with insufficient credit scores (or insufficient income or assets) were given mortgages, they were given mortgages disproportionately during the period when home prices were rising rapidly, during the early 2000s. Disproportionately when home prices were peaking, right before the crash.


Also, during a boom, as time goes on, it becomes harder to find suitable candidates to lend to because there are fewer borrowers to find, because many have already bought a home, and prices are higher.  So, in order to find people to lend to, you would need to begin lending to those you'd normally not.


What I'm trying to say is this:


Blacks and hispanics likely bought houses at higher prices than whites and asians did. Therefore, when the crash occurred, their homes likely lost more value than the homes of whites. I'd wager that an analysis of the data would bear this out.


And even worse: because blacks and hispanics have lower income and assets, they are less likely to be able to weather the decrease in equity that occurred after the crash.  As a result, they were more likely than whites to foreclose on their homes.


And even worse, because blacks and hispanics have fewer assets, they were disproportionately less likely to be able to capitalize on the lower home prices by buying foreclosed and depressed properties.


(An interesting side note, however, is this: whites and asians may have suffered
more than blacks from the cratering stock market, as whites and asians likely had disproportionately greater holdings before the crash occurred.  But the greater financial resources of whites and asians would mean they were better able to capitalize on the lower prices after the stock market crash occurred).

So there you have it: Explicit governmental and business policies promoting higher rates of home ownership by blacks and hispanics very likely resulted in the opposite occurring: Proportionately, blacks and hispanics likely bought homes at higher prices than whites and asians, lost more home value than whites during the housing crash, and foreclosed on more homes


Who would have thunk it?



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