The Coalition for Debtor Education hosted a panel discussion Wednesday morning on past and present forms of mortgage lending discrimination, the ongoing impact of subprime mortgage abuses in communities of color, and what legal recourses are available to those encountering lending-related mistreatment.
Attorneys and legal representatives from MFY Legal Services and Brooklyn Legal Services Corporation A (Brooklyn A) joined together for “What Color Is Your Mortgage? Fair Lending Issues and the Mortgage Crisis in NYC.” The program, sponsored by Fordham Law School, the Coalition for Debtor Education, and Fordham’s Urban Law Center, took place in the Law School’s Costantino Room.
The presentation’s title refers to the pervasive pattern of discriminatory mortgage lending resulting in radically different financing options for homeowners depending upon their race. The presentation illustrated that a similar pattern can be found between the subprime offerings of the 2000s and the options that people of color were offered in the recovery from the Great Depression.
Since that earlier era, white areas have traditionally been “greenlined” while African-American communities have been “redlined,” a distinction making it more difficult for people in these neighborhoods to receive fair and affordable mortgages, explained David Bryan, director of Brooklyn A’s Consumer and Economic
Advocacy Program. Bryan used a slideshow featuring maps of New York City, Austin, Texas, and Chicago to underscore how this practice has continued, largely unchanged, for eight decades.
While bank loans flowed more freely into the redlined areas in the early to mid 2000s, there was a tremendous cost to the borrower. African-Americans were three times more likely to receive subprime mortgage loans than whites (55 percent to 17 percent), often regardless of their credit standing. Banks often issued these loans with massive balloon interest payments not with the goal of receiving full repayment but rather overwhelming clients with this interest in order to seize the equity in their homes, according to Bryan.
“Homeowners were not denied credit,” Bryan said, of people living in areas of New York City like Jamaica and St. Albans. “They were denied fair credit—the credit that neighborhoods like Bayside and Astoria received.“
Seventy-one percent of African-American households have their entire assets tied into their homes, panelist Samantha Burke, a paralegal for MFY, told the audience. That number is 20 percent higher than white households.
“The overall effect of this was a complete stripping of wealth from the black and Latino communities,” Bryan said, of the subprime mortgage fiasco.
This discriminatory fleecing resulted in fines for banks but no arrests or lost licenses. Former U.S. Attorney General Eric Holder’s “Collateral Consequences” approach to white-collar banking prosecutions—or lack thereof—could be construed as encouraging risky behavior, Bryan said.
In lieu of punishment for those whose actions triggered the collapse, the Obama administration has proposed modifications to loans that would aid homeowners. Yet, of the 5.7 million homeowners who applied, only 1.3 million have received modified loans—fewer than 25 percent of homeowners.
“The takeaway from the study is that, even with modification programs, the ability for people to stay in their home after receiving bank loans has really been stymied by the mortgage services industry,” Burke said.
Government programs like Freddie Mac and Fannie Mae have done poor African-Americans few favors in the wake of this catastrophe, Bryan added.
“If the government can take a loss in Iraq, why can’t it take a loss in Bed-Stuy?” Bryan said.
The government’s primary objective, he later explained, seems to be the recovery of its funds as a means to maintain political cover in the event of a default rather than facilitating credit.
Bryan and Brooklyn A senior staff attorney Ndukwe Agwu also shared with the audience their approaches to helping individual clients take on banks in lending cases.
“If you show a good right jab to the banks they tend to back off,” Bryan said.
The Fair Housing Act of 1968, the Equal Credit Opportunity Act of 1974, the New York State Human Rights Law, and the New York City Human Rights Law include anti-discrimination measures that victims and advocates can use to combat injustices, Belinda Luu, staff attorney in MFY’s Foreclosure Prevention Project, told the audience. In addition to racial discrimination, these statutes also prohibit mortgage-lending discrimination on the basis of color, national origin, sex, religion, and other factors such as gender identity, marital status, and citizenship status.
“There are plenty of laws on the books,” noted Fordham Law School Professor and panel moderator Susan Block-Lieb. “That’s not the problem. The wider problem is society’s denial there is a problem.”
A potential inverse risk from the housing collapse, Bryan warned, is overly restrictive loan underwriting that could prevent African-Americans and Latinos from being able to own homes.
For many other Americans, this nightmare is one without an end in sight.
“The fallout for subprime loans is not over,” Burke said. “The continued lingering effects with balloon payments will continue for the next 20 to 30 years.”
The presentation concluded on a high note: Fordham Law School Associate Dean Nestor Davidson presented New York City Councilman Jumaane D. Williams with the CDE’s 2015 Friend of the Consumer award for his affordable housing work in the city.