You've probably been hearing about the devastating impact of the subprime mortgage crisis on the American economy and on the lives of individuals and families. You may be facing foreclosure yourself or know others who have already experienced it. What you may not have heard (and are likely not to hear) is that, as so often is the case, the burden of suffering is not being shared equally among all Americans. Here's a bit from the Washington Post during February:
"As we spend this month celebrating the achievements of African Americans, I'm saddened by a report that concludes that the subprime mortgage crisis has caused the largest loss of wealth for black and Latino homeowners in modern U.S. history.
The erosion of wealth is staggering.
Subprime borrowers of color will lose between $164 billion and $213 billion for loans taken in the past eight years, according to United for a Fair Economy, a nonprofit, nonpartisan organization. For the past five years, the group has examined the racial wealth divide in this country.
UFE is the latest organization to try to put a dollar figure on the losses resulting from the proliferation of subprime loans. And while some might want to dismiss the findings in the group's report as alarmist, one fact is clearly troubling: Minorities have been hit hardest.
Black borrowers will lose between $72 billion and $93 billion, and Latino borrowers will lose between $76 billion and $98 billion, UFE reports." Read the whole piece here.
Ironic that the gains made on the path of racial and ethnic equality can evaporate in what seems like the blink of an eye. The impact of the loss of wealth due to this crisis will stretch far beyond this election year or even this generation and may very well further widen the gap in quality of life between white Americans and members of minority communities. I am reminded of the dialectic described by Shoghi Effendi:
Such simultaneous processes of rise and of fall, of integration and of disintegration, of order and chaos, with their continuous and reciprocal reactions on each other, are but aspects of a greater Plan, one and indivisible, whose Source is God...the theater of whose operations is the entire planet, and whose ultimate objectives are the unity of the human race and the peace of all mankind.
(Shoghi Effendi, The Advent of Divine Justice, p. 72)
In the midst of tragedy and folly, it is helpful to believe that there is an ultimate objective to what we are witnessing at the dawn of the 21st century in a post-civil rights, post-colonial world. We are very much living "in the mean time" between today and a better tomorrow. How long it takes to get there is a decision humanity has to make.
it is disproportionally affecting poor and poorly educated people. in the US, there is a strong correlation between being poor and poorly educated and being a person of color.
ReplyDeleteit is good to keep in mind that every property that goes into foreclosure costs the former homeowner their credit score and down-payment, while it costs an investor at least 30% of the value of the loan.
the homeowner loses imaginary wealth they shouldn't have ever believed in. the investor loses cash.
in most cases, both the investor and the homeowner should have known better.
another interesting point re: racially related issues and housing troubles is that remittances to Mexico have significantly declined as residential construction jobs have evaporated. because these were "informal" arrangements, they do not appear in the jobless claims data or unemployment figures
Thanks for your thoughts.
ReplyDeleteWhat does "imaginary" wealth mean? I'm interested to hear how many homeowners, regardless of their race view their investment in a home as imaginary. Second is it simply about dollars and cents? Is losing "cash" as you say worse than losing your home? The point here is the differential impact of foreclosures on people, which in our society gets played out according to race/ethnicity. In the end, who is worse off in this scenario?
Thanks for this, Phillipe. Both for reminding us of the reality of race in the subprime mortgage crisis, and for pointing towards the horizon, as it were.
ReplyDeleteThis seems to be one more moment in history where dominant white society stops people of color from owning property. How would you or other readers see this as an example of structural/institutional racism? I ask because I could imagine some apologists attempting to argue that this crisis is the result of certain bad actors (predatory lenders) and not a supremacist society.
I am curious how this "process...of disintegration" will manifest its "continuous and reciprocal reactions." I used to read such quotes from Shoghi Effendi as calming statements. They said, "Don't worry -- while this is falling apart, something else is building itself up." But today I see it more as a statement of cause and effect. The processes of disintegration actually produce the conditions for integration. In that moment, it's on us to take action, essentially capitalizing on the ripened condition. And as we successfully build the institutions of a new world, the old one becomes increasingly more untenable. What opportunities or conditions does this crisis present for us to build a new world?
if this is not adding insult to injury.... nothing else is
ReplyDeletehttp://articles.moneycentral.msn.com/Investing/CompanyFocus/WaMuSkipCustomersSaveTheExecs.aspx
Executives will still get their Million Dollar Bonuses and the middle class will get eliminated..
Hi,
ReplyDeleteI think what Shaun might have been infering was that after the real cost of a home purchase with borrowed money, the actually equity gained is nil comapred with what was invested. Especaily if home values were originally infalted and now with the dollar value declining.
Ex. A home purchase for 150,000 with 3% down and payments over 30 years will probably cost the purchaser 360,000 - 400,000 total depending on intrest rate. If this individual sells within the first 10 years (greater intrest paid than the last 10) there home may or may not have any "real" appreciable equity due to the original inflated purchase price, and whatever equity there is will get spent in closing cost and fees. Oh and by the time you subtract upkeep and ever increasing property taxes, one has to wonder if home cownership in some neighborhoods is really much better than renting.
I guess I'm getting an education on homeownership. If what you are saying is true, what value is there in purchasing a home? Sounds like those who are encouraging members of minority groups to buy homes are hoodwinking them. I also wonder if what you and Shaun are talking about is actually related to the information in the Washington Post piece that I referred to. That's not clear to me, but I'm not an expert on this issue. Are you two saying that what the Post piece is saying is unfounded?
ReplyDelete