Is The Foundation Crumbling?

How close are you to attaining “The American Dream?” What factors, if any, impede your ability to achieve your objective? Recent news may surprise you. The very foundation may be crumbling beneath you.

But I’ll come back to that. First, I will inject a commercial for the cause. After penning last week’s post, I quickly came face-to-face with a query that challenged my thinking about the topics I have chosen to write about. The question was neither posed of me, nor applied directly to what I have written. Yet, I took it as a matter of intense personal interest and importance.

The gist of the question was why do many of us continually focus on the negative and unseemly aspects of life? It’s a theme that is oft repeated in the news, in personal conversations, and most definitely in chat rooms, and on blog sites, across the spectrum of the World Wide Web.

It was on its face, a basic question. One whose weight seemed to be magnified by the assertion that it accompanied, which was: There are an abundance of positive stories to be told; why not focus on those, instead of dwelling on the negative?

I devoted a great deal of thought to the matter. And for now at least, I respond by conceding the power, poignancy, and propriety of both the question, and the assertion…but by countering that there is also considerable currency in consciousness-raising.

The matters I have chosen to put forth have not simply plumbed the depths of negativity, but have called attention to our collective need to be ever vigilant. Through the pieces presented for consideration and discourse, I have urged us to learn from past mistakes, avoid settling for overly simplistic solutions, and take responsibility for doing our own homework.

End of commercial; now back to this week’s point of exploration. Most of us are at least interested in attaining some level or version of The Great American Dream. The term, “The American Dream,” was coined by James Truslow Adams in his 1931 book, The Epic of America. In his book, Adams defined the term, in part, as “that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability and achievement.”

At least as far back as the end of World War II, and the advent of the Servicemen’s Readjustment Act of 1944, more familiarly known as the G.I. Bill, home ownership has been considered a fundamental plank of “The American Dream.” The G.I. Bill made accessing higher education opportunities and acquiring home ownership status prime goals for many whom previously had not harbored reasonable aspirations of attaining either.

While it’s true, execution of the major tenets of this act have always been spotty, and at best, inequitably applied to People of Color, as we fast-forward nearly sixty-five (65) years, one would hope, if not expect, that there is by now a sense of equanimity associated with all aspects of a Federal law, and a universally accepted National dream.

Alas, just a few days ago, Thursday, September 13, 2007 to be precise, Binyamin Appelbaum reported, in the Charlotte Observer, that “a federal analysis of 2006 lending data shows mortgage companies continued to charge black and Hispanic home buyers higher interest rates more often than white buyers.” The report, released a day earlier by The Federal Reserve, said “discrimination by lenders may contribute to the gap.”

Of course, there are widely divergent opinions on this point. John Taylor, president of the National Community Reinvestment Coalition (an organization that bills itself as the Nation’s economic justice trade association), posits, “Racial differences are getting worse. The federal government needs to make sure that the mortgage industry is properly regulated.”

Conversely, lenders continually and consistently resist this conclusion. They suggest instead, the disproportion of blacks being charged higher rates is a function of economic differences. Moreover, they add, consideration of credit scores was not part of the analysis.

Meanwhile, the Federal Reserve, in a carefully constructed statement calls the data “interesting but not conclusive. It notes further, “Significant differences remain unexplained.”

At first glance, the lenders’ version sounds plausible. In fact it may be. But, I submit these (huge) caveats for consideration:

· This is the third year the federal analysis has been done, and the results are ostensibly
unchanged

· When income is accounted for, data showed blacks with income upward of $100,000 were
charged high rates more often than whites with income below $40,000

· Minorities were “far more likely” to be denied mortgages than whites (32% of blacks
applicants, 25% of Hispanic applicants, and 13% of white applicants)

· When qualified for loans, minorities were “far more likely” to pay high interest rates (53%
of black applicants, 46% of Hispanic applicants, and 18% of white applicants)

· To the extent the gap changed in the third year of the analysis, it widened

Yes, the lenders may have a point. I am skeptical, however. It goes without saying the mortgage industry is a powerful and well-funded lobby. If the story they put forth is the gospel truth, where is the evidence? Inconclusive results, perhaps, interesting findings, you bet, unexplained differences, definitely! What is the proverbial missing link in this equation?

Let’s just say, I’m unable to fathom why the mortgage industry has not commissioned an independent study to determine whether the discrepant charges are really a result of disproportionate economic deficiencies and low credit scores by blacks and Hispanics. The absence of an unbiased analysis is more than a little puzzling, after three consecutive reports citing the same imbalances…especially if there is, in fact, a solid conviction those factors are the crux of the problem.

I am neither a marketing guru, nor an economic savant. But in a period during which multi-year Racial disparities in lending rates have been cited, similar inequitable trends in mortgage denials have been noted, and high mortgage rates have contributed to a record number of foreclosures, an analysis to determine how anemic credit scores and other financial deficiencies impact mortgage rate determinations is a simple, yet savvy, tactical response to a trenchant public relations quagmire, and a thorny business problem. More important, it is the right thing to do!

What do you think? Holla back!


Read more about The American Dream, the G.I. Bill, and/or Binyamin Appelbaum’s story on the Federal Reserve’s analysis of mortgage lending practices and their inequities:

http://memory.loc.gov/learn/lessons/97/dream/thedream.html

http://en.wikipedia.org/wiki/GI_Bill

http://www.charlotte.com/breaking_news/story/275835.html