All’s Fair? The Foreclosure Crisis and Middle-Class Black (In)Stability

Abstract

Is the protracted foreclosure crisis eroding the Black middle class? Foreclosure rates in the United States have reached an all-time high. Blacks have been hit especially hard by this crisis. I focus here on intraclass distinctions within the Black middle class precisely because scholars and journalists so often fail to distinguish between the experiences of the Black lower middle class and those of middle and upper-class Blacks, leaving the unintended impression that middle-class Blacks all have the same odds of losing their home. I argue that conventional explanations of the foreclosure crisis as a racialized event should be amended to account for the differential impact of the crisis on three distinct groups of middle-class Blacks: the lower middle class, the core middle class, and the upper or elite middle class.

Power, Intergroup Conflicts and Social Stratification in the United States: What has the Global Crisis Taught us?

“…Regardless of the level of uncertainty in the economic environment, the black group is segregated across the occupational spectrum. This is consistent with Rugh and Massey (2010) mentioned in the previous section, but also with Lacy (2012) who looked at the foreclosure rates of the black group by level of income. The findings show that the foreclosure rate of borrowers from the black group is the highest amongst low-income, but remains at the same level, around 10 percent, also for high-income borrowers.…”

Racial Dynamics of Subprime Mortgage Lending at the Peak

“…Mortgage market deregulation in the 1980s, followed by the widespread adoption of computer-assisted, automated risk assessment in the 1990s, expanded the ability of lenders to reach new markets with high-cost, subprime loans (Avery et al, 2007;Lacy, 2012;Williams et al, 2005), which were intended for borrowers who did not have the necessary credit or financial history to qualify for a prime loan (DOT & HUD, 2000;Satter, 2009). These loans made up at least half of the homeownership gains that minorities made in the 1990s (Williams et al, 2005), but they did not come without risk.…”

“…Specifically, it is unclear whether there were differential effects of income and neighborhood racial makeup on subprime likelihood in the conventional, home-purchase market at the height of the housing boom. This article fills gaps in our knowledge and inserts itself in the ongoing debate about housing opportunity and segregation (e.g., Farley, 2011;Krysan, 2011;Lacy, 2012;Rugh & Massey, 2010;Squires, Hyra, & Renner, 2009), through examination of the extent to which previously underserved consumers-those buying homes in minority neighborhoods and perhaps wealthier blacks and Latinos in particular-acted as fertile ground in which often-predatory subprime lending practices were allowed to flourish. I employed new models to identify predictors of subprime loan origination and whether predictors vary by race, with a focus on income and geography.…”

“…When expensive (jumbo) loans were excluded from the sample, regressions found an even stronger, positive association between income and subprime likelihood for people of color, which may corroborate the theory that middle and upper middle class people of color were targeted for subprime loans when they could have qualified for prime loans. Furthermore, this provides another instance where class does not operate the same for people of color as it does for whites (Lacy, 2012).…”

Race, privilege and the growing class divide

“…While institutions punish the poor for their poverty status, higher-income people are rewarded for their success. The tax rate for earned income has fallen dramatically over time from a high of 73% in 1922 to about 39% today for the wealthiest earners, the capital gains tax has fallen from a high of 67% to 20% for wealthy individuals, social security taxes are not assessed on income exceeding $130,000 a year, and the home mortgage deduction allows homeowners to deduct a portion of the interest paid on their homes, while renters receive nothing (Lacy 2012;Massey 2007).…”