The Damage Subprime Loans Caused Black Homeowners

 David Anderson

The Damage Subprime Loans Caused Black Homeowners

1/1/23

Engl 2017


Subprime loans were created in the 1980s they where created to give people with low credit scores ways to get loans, but they are offered at a higher interest rate. Which drains out your credit score and makes it go down lower than normal if you don’t pay on time. Subprime loans were hot from the start. In 1993 there were only 80,000 subprime loans that were documented by the HMDA and made up 20 billion dollars overall of the mortgage market, and in just 5 years in 1998, there were more than 790,000 reported and made up 150 million of the mortgage market. These loans have had a negative impact to the black community from the start. When you accept one of these loans, your payment term might be a 30-year plan to which, for the first couple of years, you might have to pay 2% back each month, which they call a teaser rate. After that passes, the interest rate could skyrocket making you pay more than you were supposed to, and there is nothing you can do to change it until it is paid off. There is even a penalty if you pay off the loan before the contract ends; you will have to pay 2% more than you owe. Now on to how these loans have destroyed black communities and families. It said that black people are targeted for these types of loans by banks, with the racial wealth gap playing a big role in why they are targeted. White people make up 84% of the wealth gap, while Black people only get 4% which is a big difference between the two. It is also said that people in black neighborhoods are 5 times more likely to apply for a subprime loan than people in white neighborhoods. In 1993 8% of black homes were bought with a loan and in white neighborhoods, only 1% of homes were bought with a loan. These numbers would take a massive jump in 1998 but only for the black neighborhoods as the number jumped to 51% while it only raised to 8% in white neighborhoods. High-income black people are also two times more likely to have to apply for a subprime loan on their house than white people. In 200, there was a big crisis with subprime loans where in Prince George's County, Maryland. There is a black community in the area that has educated black people. Living there are lawyers, teachers, and federal employees. A big economic recession happened where houses were a market high 343,000$, but due to the recession dropped to 245,000 due to this recession. You think this might be a good thing, but it leads to the foreclosure of homes in the community, making Maryland second in foreclosure activity that year and. You might think why the reason is that 1/3 of houses bout were with a subprime loan where people couldn’t pay for their homes, destroying their credit in the process. As of this year, 44% of black people own homes but. There are plans being put in place to where by 2030, there will be 3 million net new black homeowners




                                                  Work cited 

Sub-Prime as a Black Catastrophe - The American Prospect

Racial Segregation and the American Foreclosure Crisis - PMC (nih.gov)

Staggering Loss of Black Wealth Due to Subprime Scandal Continues Unabated - The American Prospect

More Americans Own Their Homes, but Black-White Homeownership Rate Gap is Biggest in a Decade, NAR Report Finds

Update on Black Real Estate Wealth Trends in 2023 - Deeds.com

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