A startling new report has predicted the subprime mortgage crisis will cause people of color to lose up to $213 billion, leading to the greatest loss of wealth in modern U.S. history. The figure appears in a new report from United for a Fair Economy called “Foreclosed: The State of the Dream 2008.” The group accuses mortgage lenders of deliberately targeting the poor and people of color with high-cost loans. We speak with Dedrick Muhammad, co-author of the report. [includes rush transcript]
JUAN GONZALEZ: A startling new report has predicted the subprime mortgage crisis will cause people of color to lose up to $213 billion, leading to the greatest loss of wealth in modern US history.
The figure appears in a new report from United for a Fair Economy called “Foreclosed: The State of the Dream 2008.” The group accuses mortgage lenders of deliberately targeting the poor and people of color with high-cost loans.
According to federal data, people of color are more than three times more likely to have subprime loans. High-cost loans account for 55% of loans to African Americans, but only 17% of loans to whites.
AMY GOODMAN: Dedrick Muhammad is co-author of the report, senior organizer and research associate at the Institute for Policy Studies, former coordinator of the Racial Wealth Gap project at United for a Fair Economy, joining us from Washington, D.C.
Dedrick Muhammad, welcome to Democracy Now! Talk about your findings.
DEDRICK MUHAMMAD: Yes, Amy. Well, thank you for having me.
And I think in this time of — where there’s a lot of discussion about politics, what we are trying to reveal and what we think will be revealed over the next few years, just as Katrina a few years ago revealed the great wealth divide and how racialized this wealth divide is in this country, we’re going to see the subprime crisis do similar things.
As African Americans, Latino Americans, in particular, we’re trying to become homeowners, which is the number one source of wealth for most Americans. We see private companies taking advantage of African Americans and Latinos, putting them into loans that they could not afford, which will, in fact, actually take away the little wealth that African Americans and Latinos have been able to develop over these last thirty, forty years.
JUAN GONZALEZ: Now, the City of Baltimore recently filed a lawsuit related to some of this discrimination, didn’t they?
DEDRICK MUHAMMAD: Yes. Yes, sir. Yes, Juan. We had been in some contact actually with Mayor Dixon’s office, and what we’re seeing is that cities — and we’re going to see that states — around the country are going to realize what a dramatic effect it’s going to have on their areas, as well, because with the decrease in home value that is part of this subprime crisis, the subprime crisis is going to lead to mass foreclosures in many areas — Baltimore, D.C., in Michigan, as well, Nevada. It’s one of the — Las Vegas is one of the highest foreclosure rates. It’s bringing down the prices of homes substantially. And what that means is that property taxes are going down, so now cities and states are going to have less revenue to provide services to the people of those areas.
AMY GOODMAN: Cleveland, the mayor there also has filed suit.
DEDRICK MUHAMMAD: Oh, that’s absolutely right. And as I said, it’s going to be a national issue. And we’re already seeing some of the presidential candidates start talking about this issue. But what I haven’t heard them talk enough about is what type of policies are they going to do to support wealth-building for middle-income, working-class Americans, because over the last thirty, forty years, we’ve had policies that have really showered wealth upon the already-wealthy and have left the middle class and working class with stagnant wages and skyrocketing costs, like homeownership, like healthcare. And the middle class and working class have been looking for some way to try to cover those costs, and too many have been talked into refinancing their homes, refinancing their cars, into loans which they cannot afford, so they end up losing their homes, losing their cars and being in a worse economic situation than they were before they even started this process.
JUAN GONZALEZ: I’d like to ask you, almost a year ago, when I started doing some columns on this, on the whole subprime crisis, I was told by some business writers and also real-estate people that there was no racial discrimination involved, that this was just the reality that in the minority communities, there were a disproportionate number of people who had bad credit, and so they made the mistakes of taking out loans they couldn’t afford, and that there was no deliberate or conscious discrimination involved. Your response and what’s — and some of the evidence that’s come forth since then?
DEDRICK MUHAMMAD: Well, I think what’s clear is that whether the intent was we are going to focus on African Americans and Latinos, what’s clear is that subprime industry was focusing on the weak in our society and was trying to take advantage of people who — most people do not have the opportunity to read through the long complicated forms that happen when you refinance or when you’re taking out a home loan. And so, because of historic racism in this country, African Americans have only about a tenth of the wealth of white Americans. And again, homeownership is a primary means of wealth development. And so, African Americans are trying to, for the first time, really become majority homeowners, and the subprime industry took advantage of that situation. So whether they had in their minds they’re going to take advantage of African Americans or not, the problem is that they were taking advantage of American citizens, and this disproportionately is impacting African Americans and Latinos, but it’s also going to impact millions of working-class and middle-class white Americans, as well.
AMY GOODMAN: Dedrick Muhammad, can you talk about the connection to Wall Street and the particular companies?
DEDRICK MUHAMMAD: Well, and the way the subprime crisis has been able to develop into the point that it’s at is that there was a great financial arrangement made between Wall Street and between mortgage lenders, where mortgage lenders would take out loans from a, let’s say, a Latino American family who made a good income but had very little wealth, and would steer them into a high-cost loan and for a property that they really could not afford. And now, oftentimes in the past, mortgage lenders wouldn’t sign on to something like this, because they would be concerned about getting their money back.
But the deal they worked out with Wall Street is that they could sell this debt to Wall Street, and then Wall Street could sell it again and again and again, and you have a whole bunch of different people at different layers making money off of bad loans. So it really became to a point where mortgage lenders didn’t even care if they were going to actually get the money back from the individual they lent it to, because they knew they were making their money off of the loans being sold over and over again in Wall Street, which is why now you’re seeing major financial institutions across the country shaking from this subprime crisis, because debt had to be paid back at some point. And even though many wealthy people have made much money off of this, at some point this debt had to be collected. And so, now we’re seeing major financial institutions suffering the consequences. But who’s going to suffer the worst consequences are those who are going to have their homes foreclosed, who are going to have their credit destroyed, and have already weakened financial communities in a much worse situation.
AMY GOODMAN: Dedrick Muhammad, we will link to your report, “Foreclosed” — senior organizer, research associate, Institute for Policy Studies, worked with United for a Fair Economy on this report, “Foreclosed: State of the Dream 2008.”