The recent upsurge in mortgage foreclosures has hit one group particularly hard, according to a recent article in the Chicago Defender: middle class blacks.

Neighborhood Housing Services (NHS), a non-profit organization specializing in foreclosure prevention … identified eight red zones [in Chicago] where foreclosures are seven times the national rate: Auburn Gresham, Back of the Yards, Chicago Lawn-Gage Park, North Lawndale, Roseland, South Chicago, West Humboldt Park and West Englewood. Of these areas, seven are overwhelmingly Black, and residents of Chicago Lawn-Gage Park, Roseland and Gresham on average, earn above the state’s median income level.

The article goes on to cite a report claiming that “an African American earning more than $135,000 annually was over five  times more likely to receive a high cost loan compared to a comparable white borrower”.   The end result is that over 40 percent of conventional single family mortgages to African Americans were high cost, but only 10 percent of such loans to whites were high cost. 

Predictably, the Defender (a newspaper owned, and primarily read by, black Chicagoans) was quick to find the cause of the problem in “mortgage rate racism.”

Now wait a minute.  Everyone’s money is green.  Anyone who makes business decisions like who to give a mortgage to, what interest rate to charge, or when and how to foreclose, based on non-economic criteria like “racism” will end up losing money at the very least, and may well be forced out of business by harder-nosed competitors.  And the media would come down hard on any bank that was found to have official or unofficial “racist” policies in place faster than you can say fund-raising-opportunity-for-Morris-Dees.

Conceivably, there might be a few racist loan officers lurking somewhere in Chicago.  But if such an officer were making decisions based on non-economic factors, his or her individual performance would suffer; and if the pattern were identified, one could be certain the bank would quick to fire the evildoer to avoid adverse publicity.

Yet, the statistics are there.  Blacks do often pay somewhat more for mortgages than whites, and they do suffer from much higher foreclosure rates.  If the problem isn’t “racism,” then what is it?  Is it possible that maybe, just maybe, blacks—even middle class ones—are, on average, less financially responsible than whites?  Could blacks of any given income level—even the upper middle class—be more likely to default on smaller loans than comparable whites, and therefore be saddled with lower credit ratings?  Are, perhaps, blacks more likely than whites to unwisely reach for the absolute largest loan they qualify for, even if it means accepting “subprime” terms?  Or could blacks be more likely than whites to lose their jobs even though employers bend over backward to retain a “diverse” workforce? 

Or, or, or?  It would be possible to follow many paths of inquiry in investigating the black behaviors that produce this unfortunate result.  One can’t expect the Chicago Defender (whose very name implies its stance toward its black readership) to engage in any such self-criticism.  But what about the (overwhelmingly white-owned) “mainstream” media?  Somehow, we don’t think that the Chicago Sun-Times or the Chicago Tribune will be running an article entitled “Black Behavior Patterns and Mortgage Foreclosures” any time soon.  If anyone comes across anything even remotely resembling a dispassionate analysis of this topic, please let us know!

This entry [Permalink] was posted on Thursday, May 24th, 2007 at 10:00 am.
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