Disparity in Lending Practices

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Thumbnail image for BlackForeclosure2.jpg By Jessica Haudenschild

When we stop to think about those who may be more privileged than others, purely because of the color of their skin, their sex, or any other unearned reason, it becomes clear to us that these inequalities are beneficial to the privileged group and any time something is positively beneficial to someone, it automatically means that it is negatively detrimental to another. As a privileged person openly enjoys benefits that they think they deserve, they may be ignorant enough to not stop and think the injustices in the system that these “unearned benefits” are creating in the overall balances of society. Subprime loans directly designed to target women and minorities is a practice in which the lending industry is very aware of the injustice that is being created when subprime loans that are riddled with extra fees and details in the small writing that are disadvantageous to the borrower’s chance of actually ever paying back the loan when a lot of the women and minorities who get stuck in these bad loans could have easily qualified for a normal loan, but do to the fact that lenders are less aggressive to push these bad loans on white males who would be more inclined to object to such unfair terms, they rather target women and minorities, maybe because they have had to work extra hard to reach their share of the American dream, that when they get so close to achieving a piece of it, they are less likely to stop and read the terms that stand in their way to earning a slice of what they have worked so hard for. Yet to greedily cash in on people’s dreams is wrong and should be illegal.

The gender disparities in mortgage lending are consistent across race and ethnicity lines. All women are more likely to receive subprime mortgages than their male counterparts of the same racial or ethnic group. Most disadvantaged have been African-American women, who stunningly are 256 percent more likely than white men to receive subprime loans. Upper-income black women fare even worse: They are nearly five times more likely than white men to be saddled with high cost mortgages (www.ncjw.org, 2012) As a woman, to hear of such disparity in the loan market is extremely frustrating. To think that we may have to work harder just to get a particular job over a male counterpart, and to know that if a woman is able to make it past that obstacle then we face disparity in pay in comparison to males who may be holding the same position, then after making it through that a woman is able to finally put herself in a position to be able to purchase a home, after overcoming whatever it took to get there, then at that point she is going to be taken advantage of by a discriminatory lending market, and that the unfairness only worsens if that woman is a minority, which means she faced even more discrimination just to get to this point. This is extremely disheartening, not just as a woman but as a human being.

“In 2006, a report by the Washington-based Consumer Federation of America found that during that year — at the height of the subprime boom — upper-income Latina and black women were four to five times more likely to receive subprime loans than upper-income white men. One third of female borrowers received high-interest subprime loans, compared to a quarter of male borrowers” (www.theinvestigativefund.org, 2012).

As soon as the home loan market burst housing prices plummeted, and we crossed into a national recession, this economic downturn has led to economic hardship to all Americans, in spite of their sex or ethnicity. The problem is that as soon as unemployment rates rose, and borrowers found themselves locked into adjustable rate mortgage (arm) loans, they went to try to refinance their bad subprime loans into lower interest fixed loans, but by this point lenders began to see what was happening and began tightening their lending policies and raised the interest rate. When interest rates increased and houses prices dropped, refinancing became more difficult, leaving borrowers stuck in their adjustable rate loans that began adjusting the wrong direction and left many women with no choice but to default on their loan and resort to foreclosure. Since minority women were preyed upon by lenders, as victims to lock up into bad subprime loans, for no other reason than because lenders believed they could get away with it, the rate of minority women who lost their homes was became much higher than the average.

“The problem with data currently collected is that it tracks borrowers’ race and gender, but doesn’t track their credit history, making it hard to explain why one borrower got a rate that was especially high or a type of loan that was especially risky, unless data collection methods are improved, it will continue to be difficult to prove gender discrimination in court” said Kathleen Keest, a senior policy counsel for the Washington, D.C.-based Center for Responsible Lending (www.theinvestigativefund.org, 2012).

It may be difficult to prove that most lenders clearly preyed on minority women in a court room, leaving us with plenty of circumstantial evidence that allows us to understand what went on. There may not be enough evidence to convict any lenders of any wrongdoing in a court of law, but the numbers relay a message loud and clear; gender and racial discrimination is far from obsolete in America, and the problem with this sort of bias is that it goes beyond people being looked over for a position because of their sex or ethnicity, it takes it to a new level because women and minorities, and in this case minority women were actually being targeted and preyed upon leaving these single mothers with yet one more unnecessary obstacle to overcome.

It becomes even more difficult to swallow when we connect this situation with women in their 50’s and 60’s, which fell for the marketing blitz on women by these ill-willed subprime lenders. Now we are talking about women who overcame the disadvantage of becoming professionals in a time when opportunities were slim for women in the business world and even harder for minority women, but if we couple that with age it becomes even more crippling. Older women who had to foreclose on their homes and whose credit was severely damaged from it did not just have their homes taken away from them, but also the dream of owning a home, someday paying it off, and retiring in the home they built their life around. The hit taken on by their credit would take years to repair, putting the chances of getting the opportunity to own a home again almost out of reach, especially the idea of paying off a 30 year loan and owning the home free and clear. By forcing these women to rent also takes away the opportunity to build up equity in a home, leaving them without a potential nest egg that could have helped them when they had to retire, thus also crippling the dream of passing something on to their next generation. This takes us back to what has been an ongoing issue in America of minorities not being able to build up enough estate to pass something on to their children to be able to build up on, thus handicapping the opportunities of their offspring, once again, bringing us back full circle to the argument of the privileged and unprivileged and not just the advantages that privileged people or groups enjoy, but in a harsher reality, the disadvantages that unprivileged people or groups have to overcome.

It seems that in America, as well as all over the world, obstacles are put in front of the unprivileged, and just when those unprivileged individuals may think they might finally be getting a helping hand, they better think twice because that helping hand may actually be a wolf dressed in sheep’s clothing, pretending to help but really looking to provide a brutal blow that these fighting unprivileged cannot recover from. Just when these women could see a light at the end of the tunnel and they think that their dreams are within reach, society’s ugly side shows up just to kill those dreams and set our society’s growth back in time. Why can’t we just move forward when it comes to gender and racial discrimination? Why can’t we just make forward progress to a point where everyone is equally privileged and we all have the same opportunities to have our simple needs met? I do not have a clear answer but I can only come up with the word awareness. Any time an injustice is happening we must take it upon ourselves to expose it to the rest of society, in turn creating awareness so others are not harmed by the same injustice. Any time we are part of a corporation or an industry that may be partially responsible for creating such injustice we must find the courage within ourselves to stand up for what is right and not allow ourselves to give up on our moral values for a financial value. It is only through each individual having the courage to stand up for what is right that we will allow equal opportunity for all.

Works Cited

Retrieved on March 12, 2012 from: http://www.ncjw.org/content_1441.cfm

Retrieved on March 19, 2012 from: http://www.theinvestigativefund.org/investigations/economiccrisis/1203/in_subprime_fallout,_women_take_a_heavy_hit

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