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August 01, 2011
Wealth Gaps Between Whites and Minorities at Record Levels
    by Robert Kropp

A new study from the Pew Research Center confirms that the recession has had a far greater impact on Blacks and Hispanics than on Whites.


Even before the US housing bubble burst and the world's economies sank into recession, it was well established that predatory lenders had targeted minority customers for subprime mortgage loans, the terms of which were effectively designed to ensure foreclosure. As early as 2005, the National Housing Institute (NHI) stated, "After decades of redlining practices that starved many urban communities for credit and denied loans to racial minorities, today a growing number of financial institutions are flooding these same markets with exploitative loan products that drain residents of their wealth."

A report published last week by the Pew Research Center demonstrates just how discriminatory the effects of the recession has been. According to the report, "From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic households and 53% among black households, compared with just 16% among white households."

"In 2005, both the stock and housing markets were still rising," the report continued. "Thus, had the base year for these measurements of wealth been closer to the top of these markets in 2006 or 2007, the recorded declines are likely to have been even steeper."

The report utilizes data compiled in the Survey of Income and Program Participation (SIPP) by the US Census Bureau.

Between 2005 and 2009, median wealth fell by 66% among Hispanic households, 53% among black households, and 16% among white households. In 2009, the average black household had $5,677 in wealth and the Hispanic household had $6,325. The wealth of the average white household? $113,149.

The primary cause for loss of wealth among Hispanics was home equity. Between 2005 and 2009, the median level of home equity held by Hispanic homeowners declined from $99,983 to $49,145. "A disproportionate share of Hispanics live in California, Florida, Nevada and Arizona," the report observed, states that have been among those experiencing the steepest declines in housing values.

The report comes at a time when the mortgage industry is apparently pushing back against some of the restrictions imposed upon it by Dodd-Frank. According to Gretchen Morgenstern in yesterday's New York Times, "David Stevens, the president of the Mortgage Bankers Association, warned that the requirements on down payments and debt-to-income ratios were 'unnecessary and not worth the societal costs of excluding far too many qualified borrowers from the most affordable mortgage loans to achieve homeownership.'"

"We are still tallying the bills" resulting from predatory mortgage lending, Morgenstern observed. "To date, taxpayers have funneled $154 billion to Fannie Mae and Freddie Mac. Investors have suffered even greater damage."

Coalitions of sustainable investors have been in the vanguard of those seeking to correct the excesses of predatory lending, ever since members of the Interfaith Center on Corporate Responsibility (ICCR) began filing shareowner resolutions on the issue, way back in the 1990s. Pew's report, as well as news of renewed intransigence from the mortgage industry, suggests that the work of activist investors is, unfortunately, far from over.

 

 
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