Most economists agree that the Great Recession, sparked by the housing market crash, officially ended in 2009, but the fallout from the crisis will continue to hurt Black families, especially Black homeowners, for decades to come, according to a new report commissioned by the American Civil Liberties Union (ACLU).
The report conducted by the Social Science Research Council found that even though Black families and White families lost wealth during the Great Recession, White families lost less and recovered faster than Black families.
“Not only were Black homeowners devastated by the housing market collapse, they are now being left behind,” said Rachel Goodman, a staff attorney with the ACLU’s Racial Justice Program. “It is very much a tale of two recoveries.”
The report said that between 2007 and 2009, the average White family lost 9 percent of the equity in their homes, compared to average Black homeowner who experienced a 12 percent fall in home equity.
“This disparity may stem from the fact that blacks were more exposed to predatory loans and other types of toxic mortgages and ballooning interest rates as compared to whites, leading to disparate rates of delinquency and foreclosure,” the report said.
“While White home equity began to recover quickly after the housing crisis stabilized, this was not the case for Blacks,” the report said. “This difference likely emerges as a result of Blacks’ disproportionate exposure to predatory loans and other deceptive mortgage schemes.”
“Without the Great Recession, by 2050, home equity values for Blacks and Whites whose parents or grandparents owned a home at some point between 1999 and 2011 may have approached parity,” the report said. “As a result of discriminatory lending practices and the Great Recession, our analysis suggests that the next generations of Black families will still have home equity values only 70 percent of their white counterparts.”
In 2012, Justice Department Investigators found that minorities were steered into subprime mortgage loans at higher rates than similarly qualified White borrowers. A settlement with one of the major national banks included $184.3 million for minority borrowers and another $50 million in resources for direct down payments to help residents living in communities hit the hardest during the housing crash. But it’s going to take more than settlement money to help Black homeowners guided into subprime mortgages, who were crushed during the housing market crisis as they continue to struggle almost six years after the end of the recession.
The report recommended that policymakers closely monitor current lending practices at banks to protect low-income and minority borrowers from discrimination.