Subprime lending causes greatest loss of wealth for people of color

From UFE's January 2008 Enews

For many, the American Dream means owning a home. People work hard, save money, and ultimately try to obtain a mortgage, hoping for a better life. Yet for many people of color, the American dream has become a nightmare.

Our new report, Foreclosed: State of the Dream 2008, finds that due to racial bias, people of color are being hit especially hard by the current subprime lending crisis. As homes are foreclosed and families of color find themselves in financial ruin, the racial and economic equality that Martin Luther King, Jr. once envisioned is moving even further out of reach. We found the estimated total loss of wealth for people of color to be between $164 billion and $213 billion for subprime loans taken during the past eight years. This breaks down to losses of between $71 billion and $92 billion for Black/African-American borrowers, and between $75 billion and $98 billion for Latino borrowers for the same period.

If subprime loans had been distributed equitably, losses for white people would be 44.5% higher and losses for people of color would be about 24% lower. Despite the overwhelming data, the government and the financial industry have remained largely silent about regulating mortgage brokers to combat racial economic injustice.

The subprime mortgage crisis affects whole communities negatively, spilling over to increasing amounts of abandoned houses, increased crime, devaluation of neighboring houses, and erosion of the tax base.

What can be done?

A key to closing the racial wealth gap is to address racial and economic inequalities and support holistic policies that protect, build, and create access to wealth for those affected by the subprime crisis.