New Article: Richard Winchester, Homeownership While Black: A Pathway to Plunder, Compliments of Uncle Sam. Abstract below:
Historically, the federal government played no role in regulating housing finance. That changed when New Deal legislation created the Federal Housing Administration to provide insurance on home mortgages. FHA insurance was expected to eliminate the risk that banks ordinarily faced when lending money for a home purchase, thereby encouraging them to make loans to finance the construction of new homes. This federal intervention both lowered the cost of mortgage credit and stimulated housing construction. However, because the FHA did not insure mortgages on homes located in areas where blacks lived, banks stopped offering mortgage loans to blacks, and builders refused to sell homes to black buyers. Facing an undersupply of housing and mortgage credit, black families were exploited by real estate predators who got rich at their expense in a shadow market that emerged to meet their needs. These predators bought homes from whites at a discount and resold them to blacks at a premium under a rent-to-own arrangement called an installment contract. Aside from featuring much higher monthly payments than a mortgage, such a contract required the buyer to forfeit the home and their entire monetary investment if they defaulted. The FHA’s anti-black policies created the conditions for this shadow market to thrive for three decades before Congress outlawed the agency’s discriminatory policies. In the interim, homeownership proved to be a wealth eroding proposition for vast numbers of blacks
Poverty Law 