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The collapse of housing prices continues. Defaults on mortgages continue to rise; foreclosures are now occurring at the rate of 3 million homes a year and rising. Housing experts suggest that US home prices still face another 15 percent in price declines, leaving an estimated 30 percent of US homeowners under water—with mortgages larger than the value of their homes.
Declining home values have already taken a harsh toll on consumer confidence, which has plummeted to its lowest level in 28 years. A further drop in home prices could drive consumer confidence even lower.
Now the financial crisis has led to economic recession, with unemployment up, wages down, while prices of gas and food soar. Consumer confidence is at the lowest level in 28 years. This, in turn, will lead to more defaults, more foreclosures and a continued decline in housing prices.
Where is the outrage? This was not an act of nature. The housing bubble—and its subsequent collapse—is the direct result of the banking community’s success in freeing itself from sensible regulation, and a direct result of an administration that failed to use the powers it had under the law.
At the center of this was abandonment of the Fair Housing Act. Signed into law one week after Dr. Martin Luther King was assassinated, the act was one of the era’s last major pieces of civil rights legislation. It prohibits discrimination in the sale and rental of housing. President Johnson hailed the bill as fulfilling one of the “promises of a century. ...It proclaims that fair housing for all—all human beings who live in this country—is now a part of the American way of life.”
But discrimination in the sale and financing of housing lies at the center of the current subprime mortgage mess. New research released by the National Community Reinvestment Coalition exposes how widespread the discriminatory practices were, confirming what studies by the Federal Reserve and others showed. This is not, as many believe, a question of people looking for homes beyond their means. The NCRC study shows that racial differences in lending—the peddling and targeting of high cost loans—were more pronounced among middle and upper income black and Latino borrowers, than among those with more modest incomes.
Looking at data from 2006, the NCRC study found that in nearly 3/4 of the metro areas it investigated, middle and upper income Blacks were twice as likely or more than middle or upper income White borrows to receive high cost, often deceptive loans. These loans and the discriminatory behavior, the NCRC concluded, “have significantly contributed to the current foreclosure crisis, wiping out hundreds of millions of dollars in mortgage equity.”
Residents in Prince Georges Country, Maryland, one of the more affluent black counties in America, talk about how mortgage peddlers called them out of the blue, attended their churches, approached them on the street, all offering deals to remortgage houses that seemed too good to be true—and turned out to be just what they seemed. Many remortgaged homes, taking some money out, but ending with deceptive loans that socked them with rising payments, hidden fees for refinancing, and debts beyond their ability to sustain. The brokers didn’t care; they were paid on the basis of deals cut, not on the basis of the soundness of the loan.
If the Justice Department had enforced the Fair Housing Act, these practices would have been curtailed. Hundreds of thousands of homeowners might have been protected. Millions of their neighbors would have avoided deep losses in the value of their homes due to foreclosures in the neighborhood
This failure was but part of the broad opposition to regulation and civil rights enforcement by the administration and the Republican congresses. The Federal Reserve had the power to police the banking practices, but only served as co-conspirator as the banks racked up debts, on and off their balance sheets, while inventing and peddling ever more risky instruments. Freddy Mac and Fannie Mae, which guarantee or owned nearly half of the market in housing mortgages, could have refused to pick up loans from the areas that were clearly overheating, thus squelching the speculative bubbles. Their lavishly rewarded executives failed at their jobs.
Now, as the country tries to dig out of this mess, and the scope of the damage is apparent, some clear lessons should be learned. Markets need regulation. Failing to enforce the law can cause damage far beyond the immediate victims of the lawlessness. Equal protection under laws that are enforced isn’t simply a civil rights agenda. It is an agenda that applies to all.
Reverend Jackson n can be contacted by e-mail at