The US government encouraged, incentivized, and subsidized homeownership for Whites in the early 20th century, while the Federal Housing Administration’s policy of redlining prevented Blacks from participating in this act of citizenship. To alleviate the ever-present housing shortage for Blacks, the 1968 Fair Housing Act created the first low-income homeownership programs using subsidies, long amortization periods, and mortgage insurance guarantees to entice participation of the real estate industry.

Unregulated mortgage banks saw an opportunity to make money on FHA loans by charging high origination fees, servicing fees, and “discount points”–money paid by the borrower before making the first loan payment. When a loan went into foreclosure, since the front-end fees and discount points were paid first, mortgage banks had already made their profit on the loan. With the FHA guaranteeing the full amount of the loan, mortgage banks made more money on foreclosed loans than on loans paid off at maturity. They also packaged multiple mortgages and sold them to GNMA, allowing them to free up capital to originate more mortgages. GNMA was required to purchase these mortgage-backed securities at 100% of face value without any assessment of soundness. With the backing of GNMA, long-term investors didn’t have to worry about foreclosures adversely affecting their investment; FHA mortgage insurance didn’t protect the homeowner, it protected the investors.

With rising demand for mortgage-backed securities, poor, Black women were increasingly targeted for low-income homeownership programs because of their high likelihood of foreclosure. To get loans approved on substandard properties, appraisers were paid to provide inflated valuations with later investigations showing as many as 88% of appraised Section 235 properties having “significant deficiencies affecting safety, health or livability.” The US housing market that for decades had been one of racial exclusion, was transformed by HUD-FHA into one of predatory inclusion by removing financial risk for the private sector while extracting savings from the ghetto and reinvesting the money in White suburbs. The failure of the 1970s homeownership programs increased the wealth of Whites and reinforced their perception that Blacks destroy value, while a generation of Americans born in the 1960s and 1970s grew up believing that suburban housing appreciation and urban neighborhood deterioration were natural phenomena.

Recommended reading: Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership by Keeanga-Yamahtta Taylor

Predatory Loans Were Developed for Black Borrowers

The photograph is part of the documentary archive that portrayed the economic and social difficulties in rural areas of the United States caused by the Great Depression.

Source(s):

.- Schomburg Center for Research in Black Culture, Photographs and Prints Division, The New York Public Library. "Negro mother teaching children numbers and alphabet in home of sharecropper, Transylvania, Louisiana, January 1939." The New York Public Library Digital Collections.

I've been building a daily puzzle based around U.S. presidential history.

You get a 3x3 grid of categories and have to identify a president who satisfies the clues for each square.

It gets surprisingly difficult once you get beyond the obvious presidents.

If anyone here wants to try today's:

https://gridofminds.com

What dialectical materialist message have you learned about self-determination?