2000: “Wealth Building”
Graph showing the racial disparity of the subprime mortgage crises.
Source: Lost Ground, 2011
Due to its long-segregated neighborhoods, “Baltimore became a hotbed for subprime mortgage abuse” (Pietila, 2010, p. 257). Banks like Wells Fargo and Bank of America saw an opportunity to expand into a market desperate to own a home after decades of segregation and systemic racism had forced them into renting. These lenders offered low-income African Americans what looked like a dream come true: low closing costs, low mortgage rates, and low monthly payments. What was kept hidden from many people of color were the terms of these sub-prime mortgages. As Coates (2014) noted
When subprime lenders went looking for prey, they found black people waiting like ducks in a pen…in 2005, Wells Fargo promoted a series of Wealth Building Strategies seminars…but the “wealth building” seminars were a front for wealth theft. In 2010, the Justice Department filed a discriminatory suit against Wells Fargo alleging that the bank had shunted blacks into predatory loans regardless of their creditworthiness.
Rothstein noted that in Baltimore, Wells Fargo established “a unit staffed exclusively by African Americans whom supervisors instructed to visit [B]lack churches to market subprime loans. The bank had no similar practice of marketing such loans through white institutions” (Rothstein, 2017, 113).
When interest rates rose on adjustable rate mortgages (ARMs), which were the loans given to low-income people of color, their monthly payments increased. As banks bundled these loans and sold them to investors, rating agencies considered them a good risk, and so no one saw the crash coming. As interest rates rose in the mid-2000’s, more and more families missed their ever-increasing mortgage payments. And as more and more mortgage payments were missed, more and more banks, like Wells Fargo and Bank of America, foreclosed on properties that were, in most respects, dream homes for families who had been targeted for predatory loans.