Foreclosures Have Been Especially Bad for the Black Middle Class

The housing boom ultimately led to the foreclosure bust and foreclosures have been especially bad for the black middle class.

The servicers of mortgages were hungry for gains and lured by the boom in the housing sector they completely changed the character of the loans by bundling and packaging the loans into securities and slicing them. These were then sold to investors across the globe through the stock exchange and they reaped high profits.

Thus it was not surprising that after the bursting of the housing bubble defaults began to increase and foreclosures hit the country like a tornado. It sent shock waves through Wall Street and brought down the economy of the country on its knees.

But the devastation was far worse in the streets occupied by the blacks. It represented the biggest wealth loss for the blacks in modern American history according to a well-researched report titled “Foreclosed: State of the Dream 2008” A non-profit group – United for a Fair Economy, published it.

The sub-prime fiasco will cost the Afro-American borrowers a loss ranging from $71 billion to $92 billion. The domino effect will exact an even greater toll. The report stated, “The spillover effect of the sub-prime crisis affect whole communities negatively, in terms of abandoned houses, increased crime, devaluation of neighboring houses, and erosion of the tax base, causing revenue shortfalls that mandate service cuts.”

Pundits agree that at the root of the foreclosure catastrophe is the wage crisis that has forced Afro-Americans to live from one payday to another without having any savings to fall back on. This has made them take extra mortgages on the existing ones to bridge the chasm between income and expenses. But the increasing cost of living and lowering of wages and rising of lay offs made things untenable.

The people are not saving because they are indulgent or thoughtless but because what they earn is just not enough to survive on. For the last three decades the growth of income has been low. To make up people have to work harder as well as use up more credit facilities.

Among the Afro-Americans the income growth has been the slowest because of the type of industries in which they generally work – the manufacturing sector. Unfair trade practices by foreign countries egged on by governmental policies gnawed into these job banks causing the blacks to be worst hit by the foreclosure crisis.

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