A Digression on Mortgages and Race

Found this article at mpamag.com (my work website links to them, since it’s a mortgage company), which rather amused me in a dark way. I won’t go through the whole thing, suffice to say it’s about a new ‘equitable housing plan’ being put forward by Fannie Mae (one of the two major housing authorities) to “to remove barriers Black homeowners and renters face in the housing market.”

You can read it if you like, but the key excerpt that I wanted to comment on:

According to the National Association of Realtors, some 72% of White Americans were homeowners in 2020 – more than 30% more than Black Americans. As such, the Equitable Housing Finance Plan builds on recent efforts Fannie Mae has taken to make mortgages more inclusive to them, focusing on three key aspects:

  • Housing preparation: Helping Black consumers prepare early for sustainable homeownership and access to quality rental housing through credit building and financial education.
  • Buying or renting: Removing unnecessary obstacles Black people face in shopping for, acquiring, renting, or mortgaging a home.
  • Moving in and maintaining: Enhancing sustainable homeownership so renters and homeowners can withstand disruptions or temporary hardships and remain stably housed.

I love this: the ‘three key aspects’ are so vague and equivocal that it basically amounts to “we’re going to do good stuff”.

E.g. What are the “unnecessary obstacles”? Do these actually specifically target Blacks? Somehow I doubt that (what with it being illegal and all). What makes them unnecessary? Why did they exist in the first place? How are you removing them? Did you ask Mr. Chesterton whether you could take down his gate?

And what does it mean to ‘enhance sustainable homeownership’? How do you ‘enhance’ ownership? Reading between the lines, it sounds like greater leeway in defaulting on rent or mortgage payments, which sounds like something that really should be handled on a case-by-case basis rather than imposed as a nation-wide standard. Rather like most such measures.

And of course, education! That fixes everything! (Someone involved’s gonna be able to afford a new house, it sounds like)

Also note the assumption: because White Americans are homeowners at a higher rate than Black Americans, discrimination must be to blame and Something Must Be Done!

I mean, in the first place both populations are so large and diverse that trying to do anything across the board with them is rather ridiculous.

More to the point: where does the majority of the Black population live in the United States? Do you think that might have something to do with their rate of homeownership? If you live in New York City or Los Angeles or Chicago, then ‘removing obstacles’ to homeownership really isn’t going to make much of a difference when a one-bedroom house on a postage stamp of land costs twenty times your average salary (my hometown of Detroit offers massive incentives to buy and repair existing homes, which would probably do a lot more than this if it works at all).

On that subject, have you investigated how many of these people want to buy homes? Let alone how many want to buy homes, but were stymied by these “unnecessary obstacles”? I don’t see anything at all on the subject in the article.

Taken at its best, this looks to me like what I would call a Large Hadron Collider permit (taken from an excellent analogy made by Ross Scott in one of his videos). Which is to say, if there were no legal obstacles whatever to building a Large Hadron Collider and anyone could make one his backyard if he wanted, would that actually make any difference to how many people did so?

If someone lives in an area where house are priced well out of his range, or if his only options are neighborhoods where home-ownership would be an unwise investment, or if he doesn’t want to buy a house because of the extra costs and time investments involved, or because we’re such a rootless society that there’s not really much to choose between owning and renting for a lot of people, or if his life is so broken and unstable that homeownership makes no sense, then is any of this silly legal work really going to do anything at all?

Racial matters aren’t my forte, but my impression is that of the problems facing the American Black community, ‘not getting mortgage loans due to vague obstacles’ probably ranks pretty low down the list. This whole thing seems to me typical of our approach to race issues: we grab one context-free economic benchmark, note there’s a proportional discrepancy, cry ‘discrimination!’ and haul off after a clumsy legal solution. All the right people sing praises of its vague promises, and things carry on as before.

3 thoughts on “A Digression on Mortgages and Race

  1. You’re worried about whether this actually helps racial minorities… I vaguely recall hearing about Fannie Mae and Freddie Mac pushing affirmative action home loans over a decade ago. Allegedly the banks dealt with it by reselling the debt to spread it all over the economy, hence why the subprime mortgage crisis became a general economic crash.

    I’ve always wondered what I’d have to dig into to confirm or deny those explanations.

    Of course, the 2008 crash itself led to accelerated consolidation of American business, especially in the financial sector. When random left-leaning folks on the ground noticed (Occupy Wall Street etc.), within a few years suddenly everyone on that side of the aisle was talking about white male oppressors instead, almost as if identity politics were one massive diversion from noticing that the same people who crashed the economy made out like bandits at everyone else’s expense…

    You know what they say about learning from history, or failure thereto.

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    • I seem to recall that too.

      Selling mortgages is a huge part of the industry: as in, packaging a lot of mortgages that you own and selling them to someone who wants to receiving the payments and interest and so on. It’s a large part of how mortgage companies make money.

      From what they told us, part of the problem in 2008 (if I remember rightly) was the fact that so many of these mortgage packages rested on unreliable or even non-existent mortgages. So, banks / businesses rest their credit on the mortgages they buy from brokers and wholesalers, only turns out those mortgages were bad, so the banks / businesses suddenly find themselves resting on bad investments.

      (though I’m reciting that from a nearly year-old memory, so I might have some stuff mixed up. The selling mortgages part I’m sure of, though)

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      • Yeah, I guess the only potentially controversial part is the claim that FM&FM pushed all those bad mortgages at the bottom of the scheme in the first place because of affirmative action specifically – at least, I thought it was something along those lines from one account I heard, but it’s been… I guess over a decade now, so I may or may not be remembering right. Wish I’d gotten a source for the claim but I’d just as likely have misplaced it in the intervening years.

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