Monday, November 30, 2020

Systemic Racism in the Home Mortgage Context: We Don't Have Time to Notice

In 2020, pivotal events ushered in a season of antiracism rhetoric in the U.S. The brutal deaths of unarmed black Americans at the hands of police officers and white vigilantes, and the disproportionately harsh impact of COVID-19 in the black American community, launched the nation into a discussion about systemic racism. Unfortunately, it seems likely that the 2020 antiracism discourse was merely seasonal rather than enduring, and unlikely to result in meaningful change. 

Black American’s vulnerability in the face of systemic racism is not limited to death, sickness and injury as a result of COVID-19 or antiblack bias in police departments. Our vulnerability is precipitated by things like lack of access to nonpredatory financial services. This is just one of the contexts that compromise black Americans’ economic survival. Unacknowledged systemic racism destroys the wealth and wellbeing of black individuals, families and communities, sometimes causing working and middle-class black Americans to plummet into poverty. As 2020 comes to a close, an election that threatened democracy in the U.S. and the existential threats of an uncontrolled pandemic, eclipse a system of intentional antiblack racism on the part of the financial institutions that engaged in predatory mortgage lending in the years leading up to and beyond the 2008 recession. It is now well documented that lenders, brokers, and mortgage servicers engaged in conduct that was fraudulent and misleading. The mortgage market charged excessively high rates and fees, engaged in high-pressure sales tactics, imposed unnecessarily harsh prepayment penalties, and distorted loan structures to avoid the application of consumer protection statutes.  But, more than a decade later, many black Americans are still fighting to prevent financial institutions from taking away their homes. 

In a book I coauthored with Dr. Janis Sarra, a law professor at the University of British Columbia, Predatory Lending and the Destruction of the African American Dream (Cambridge University Press, 2020), we describe new iterations of predation that continue to target black consumers years after financial institutions settled litigation that alleged pervasive fraud on their part for steering black Americans into predatory subprime loans. But these renovated predatory practices are obscured by the nation’s focus on COVID-19 and a vitriolic election season. Meanwhile, more black Americans will lose their homes even after investing all or most of their wealth in attempts to keep them. This reality requires the calls for moratoriums on mortgage foreclosures to be answered in the affirmative.


  1. From my understanding, subprime loans are provided to those individuals with a FICO credit score of 600 or lower. However, a credit score is nothing more than the output of a mathematical formula built to rank-order the likelihood of whether or not a person will repay the debts in which they have incurred - it is not calculated based off the color of ones skin. However, skin tone has become a relevant part of the conversation, in that areas of economic disadvantage are occupied mostly by individuals of color. This economic disadvantage, in part, stems from lack of opportunity. An individual living in an impoverished area has less opportunity because people or businesses are less likely to create opportunities. Businesses aren't going to move into an area where profits cant be realized. Essentially, these inner cities are most analogous to that of a graveyard, as opportunities and growth are invested elsewhere. This direction affects earning potential, thereby resulting in a lower FICO score and subprime rates. These predatory actions are not taken because the color of ones skin, but because of the economic disadvantage that accompanies inner city living, or any other area where lack of opportunity to prosper exists. Often revitalization to impoverished area commence, but that only results in individuals of minimal means being ousted into areas of lesser means. However, HUB has stated that when comparing upper white neighborhoods to that of upper black neighborhoods, only 6 percent of white homeowners have subprime loans while 39 percent of black homeowners have subprime loans - this is a significant disparity. It is strange to consider that we live in a society where we charge individuals more, for having less. I would support a moratorium on subprime loans.

    Ken Connor

  2. It's easier to have a good credit score when you come from generational wealth. It's also easier to buy a house when your family can help you with the down payment. Racism in the educational system, to discrimination in the hiring process, to discrimination in deciding who gets promotions and who is selected to corporate boards all work together to make sure that old white men stay rich and in charge. It is already difficult enough for minorities to survive on this uneven playing field without the added disadvantage of predatory policies that specifically target them.

    With Quicken Loans, of the 12 members of the leadership team, only one person is a person of color. That one person is also the Chief Diversity Officer. Perhaps more diversity from these lenders would make them have fairer policies.

  3. The problem I see is twofold. First is the generational wealth issue that Alexis points out. The other is risk. The first one creates the other. Lenders take risk and that means charging a rate commensurate with that risk. The lack of generational wealth makes it harder to pay for the acquisitions we require in life. Those without it must make payments on things that are in no way assets, cars, furniture etc. This leads to higher risk and higher interest rates. Solve the problem of wealth and predatory lending should solve itself. The predatory lending is only a symptom not the cause. The lack of opportunity for people of color from a generation or more ago is the proximate cause of the difference in lending today. IT is unfortunately not a switch that can be flipped and suddenly the laying field is level. We can tweak the levers a bit but it will be another generation or more before anyone benefits from it.

  4. Honestly, I find this post to be super interesting. I think it is important to acknowledge that so many facets of life are being affected by the pandemic. Unfortunately, systematic racism is essentially embedded within American culture. I am simply not shocked to learn that financial institutions are using the COVID crisis to exploit minority communities even further than they already are. I agree with the comments that precede mine that generational wealth and risk play are large factors when determining to give a loan. Additionally, I have to agree that systematic racism continues to place minority communities at a disadvantage. One would hope that society would be able to get beyond that and provide people with equal opportunities. The system needs to change, and it shouldn't take generations to do it.

    -Amanda Williamson

  5. What some fail to understand is the difference between systemic racism and blatant racism. It is harder to find someone who purposely preys on people because of their race. Yes it happens, but there are avenues to fight and address blatant racism. Systemic racism on the other hand is something that is embedded into our systems and may end up hurting people besides racial minorities. Yes we have come a long way since slavery, segregation and Jim Crow, but some of those underlying divisive and racist policies have taken root and wont go away so easily. Consumer protection laws have come a long way, but some of the prior racial laws, have evolved and developed into what we have today. Yes, some of those newer laws target the poor regardless of race, but that is the horror of systemic racism. Just because something is not blatant or overtly racist, does not mean that there is not a racist undertone or lingering effect of a racial past. If a legislator dislikes minorities, they may take that dislike on all those in an inner city or of a specific economic background. Not because they dislike the whites in those areas as well, but because they find it easier to sacrifice racial bystanders than it is to try to mastermind a complex system that only targets one race. This does not mean that its not systemic racism. All of this to say, change is needed, and we need to start rooting out systemic racism in our nation.

    - Damien Powell

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    Marie Carlos,
    Texas USA