For Black Americans, Damage From Housing Crisis Likely to Linger
Rather than helping black communities build wealth, recent studies show that the lending boom may have helped destroy it. A Pew Research Center analysis found that the wealth of blacks plunged 53 percent during the recession, driven by falling home prices.
The sub-prime lending meltdown left what appears to be a permanent scar on the finances of black Americans, threatening to wipe out a generation of economic progress and leave in its wake decades of financial disadvantage.
African Americans disproportionately held sub-prime mortgages during the housing boom and continue to face foreclosure in outsized proportions.
According to FICO, a foreclosure can remain on a consumer’s credit report for seven years and lower a credit score by 85 to 160 points, a decrease second only to bankruptcy. Those scores ultimately determine who can buy a car, finance a college education or own a home.
That’s causing some consumer advocates, academics and federal officials to declare that the credit scores of African-Americans have been systematically damaged.
The NAACP and the National Urban League have declared that the nation’s financial crisis is ushering in era of economic segregation.
Federal laws also prohibit credit bureaus and lenders from using race as a factor when deciding who qualifies for a loan.
However, the Justice Department recently reached a $21 million settlement with SunTrust, over what it called a “racial surtax” on home loans. In one case, it said black borrowers in Atlanta were charged $745 more in fees than white borrowers with similar credit histories and qualifications.
The Justice Department also reached a $335 million settlement with Bank of America over similar charges last year and is investigating Wells Fargo.
Still, many civil rights leaders say the settlements are dwarfed by the long-lasting damage done to the black community.