BY TANIESHA ROBINSON, NORTHWESTERN UNIVERSITY, MEDILL REPORTS
CHICAGO - The burst of the housing bubble was a prescription for struggle for most American homeowners. Rebound efforts, however, are proving more difficult for blacks and Latinos than for whites, according to two recent studies.
Chicago-area blacks and Latinos are having more difficulty than whites getting home mortgage lenders to have faith, according to a February study by National People’s Action, a nationwide network of community organizations headquartered in Chicago. The research findings support a broader economic theory outlined by Harvard professor Benjamin Friedman in his 2005 book, “The Moral Consequences of Economic Growth.” That theory, in a nutshell, says when everyone gets kicked by the economy, minorities tend to get kicked harder.
Black homeowners in the Chicago, Peoria, St. Louis, Detroit and Kansas City, Mo., metro areas suffered an 86 percent decline in mortgage refinancings between 2006 and 2009, according to the National People’s Action study. Latinos saw a 76 percent decline during the same period.
White homeowners, however, experienced an 89 percent increase in refinanced loans during that period.
A national study reported parallel results. That study by ComplianceTech, an Arlington, Va.-based lending intelligence service, showed blacks and Hispanics were able to borrow 62 percent less to buy or refinance homes in 2009 than in 2004, before the housing market crashed, compared with a 17 percent decrease in what whites were able to borrow.
Maurice Jourdain-Earl, author of the ComplianceTech study, said he conducted the research because he was disturbed by innuendos that lending to minorities with less attractive borrower profiles and affordable housing goals were the cause of the mortgage market meltdown.
“Many of the victims were being accused as if they were the cause of the problems,” Jourdain-Earl said. “There were more loans made to non-Hispanic whites that were high cost than all minorities of color put together.”
Northwestern University sociology professor Mary Pattillo said that people of color were the target of high-cost, subprime loans before the housing market crashed because many had less attractive borrower profiles with higher debt ratios and less savings.
“That’s partially the reason why blacks are denied traditional loans at a higher rate than whites,” Pattillo said. “But above and beyond that, when you control for debt ratios, when you control savings, when you control for outstanding credit and all of those things, we find that blacks are still more likely than whites to be sold high-cost mortgages. That’s when it’s not the interaction of race and economics. It is race.”
Increased discrimination in times of economic struggle is a story from the history books, according to Friedman, the economist and Harvard professor. In his book published pre-recession, Friedman documented national movements toward and away from openness, tolerance, mobility, fairness and democracy.
“Countries where living standards improve over sustained periods of time are more likely to seek and preserve an open, tolerant society, and to broaden and strengthen their democratic institutions,” Friedman wrote. “But where most citizens sense that they are not getting ahead, society instead becomes rigid and democracy weakens.”
The home loan segregation studies show that the recent recession may be falling in line with Friedman’s theory, at least in terms of housing issues.
Besides racial discrimination, structural issues may be enough to continue driving credit segregation, according to Jourdain-Earl, who said that there are too few banks and too many check-cashing and payday loan services in communities of color.
Jourdain-Earl said that if white Americans realized the extent that they’ve also been victimized by credit lenders in recent years, “they too would be up in arms.”