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Mission Matters - April 2023

Why do White Americans have on average 13 times more wealth than African Americans? There have been government policies after the Civil War that have led to this disparity. Bread for the World has documented some of these policies. Here is their Policy # 9 contributing to the gap.

Minding the Gap: Policy #9 Subprime Loans

Starting in the 1970s and continuing today, the private sector issued subprime loans (loans with higher interest rates) to black families almost exclusively—regardless of a family’s income, education, or good credit history. As a result, blacks continue to unfairly pay more for homes of the same value as their white counterparts. This increases foreclosure rates among blacks, which also contributes to higher food insecurity levels.

Issuing subprime loans almost solely to people of color is a recent form of inequality born of older forms of discrimination. The U.S. Department of Housing and Urban Development and the U.S. Department of the Treasury reported that as of 2000, “borrowers in black neighborhoods [were] five times as likely to refinance in the subprime market than borrowers in white neighborhoods.” This was the case even after controlling for income. And when different income brackets were compared, the report found that upper-income African American homeowners were twice as likely as white homeowners in low-income neighborhoods to have a subprime loan. This reinforces how subprime loans were made disproportionately to people of color based on discrimination; loan approval had little to do with income bracket, wealth, or ability to pay. One of the worst financial losses suffered by the African American community came during the 2008 housing crisis. When the housing market collapsed, 240,000 African Americans lost their homes. High-income African Americans were 80 percent more likely to lose their homes than high-income whites because they were far more likely to have subprime loans.

How do subprime loans contribute to the racial hunger, income, and wealth gaps?

Being approved disproportionately for subprime rather than prime loans meant that African Americans paid a higher percentage of their income toward their mortgages than their white counterparts, leaving them less money for food, savings, and other needs. Subprime loans devastated African American communities and eroded wealth that had been accumulating. Many gains that had been made were eliminated.

Mending the Gap:


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