Thursday, September 10, 2009

Mud People and Ghetto Loans

Yes, really. No, I did not make up the title, it was actually taken from affidavits in a Maryland lawsuit against Wells Fargo Bank. A former employee, Mr. Paschal blew the whistle in the affidavit, which states:

“They referred to sub-prime loans made in minority communities as ghetto loans and minority customers as ‘mud people.’” He also said a Wells Fargo Bank office in Silver Spring, Maryland had an “affinity group marketing” department, whose purpose was to hire African Americans to call on African-American churches.”

See, this is the kind of stuff I like to point out to all of the people who say that racism no longer exists and that black folk just like to "play the race card." What is just as bad, if not worse—is that we helped them do it, by marketing these loans to our very own community. Now granted, I have to assume that the African American employees were not working with the knowledge that they were being referred to as "mud people"— the affidavit didn't mention any beat downs, to my knowledge. But what happened to reading things before signing them and "it takes a village?" I may not be an expert on mortgages, but you can bet your Jet subscription that I know someone who is or would find one fast if I were contemplating a real estate purchase.

“The company put ‘bounties’ on minority borrowers,” Mr. Paschal said. “By this I mean that loan officers received cash incentives to aggressively market sub-prime loans in minority communities.”

This is par for the course. African Americans are the largest consumer group in the country by far, and sadly, we ask for little to nothing in terms of return on our investments. So if a person or company wants to make a fast dollar, all they need to do is sell it in the black community. We see this regularly with low-end items like bootlegged CDs and DVDs, fake handbags and and clothing—even rent-to-own stores & check cashing places... But mortgages? C'mon!

And that they sought out our churches to do this too! I spoke to one gentleman who was telling me that his pastor was praying that everyone in the congregation who needed transportation would be blessed with a new car, and within a month they were. Praise Jesus! They later found out that the pastor had entered into a deal with the dealership to get them all approved for financing, but most of them were paying ridiculously high interest rates. The Devil is a liar!

The NAACP filed suits against Wells Fargo and HSBC for forcing black customers into subprime loans, while giving white customers with identical finances and credit scores lower rates.
I see this as just another part of the systemic racism that keeps poor black people poor. If you only give folks high-interest loans, then more than likely they will end up with bad credit from struggling to pay that loan. So then what happens? They cannot qualify for refinancing due to the poor credit rating, and they lose their investment. The bank/financing company then gets to repossess the car or foreclose on the property and has effectively made money on the deal and humbled the black person (who forgot his/herself and thought they were worthy of the American dream) all in one fell swoop.

However, we need to take some proactive steps to educate our community on how to handle finances. If you never saw your parents pay bills on time or put money in a savings account, then more than likely, you won't do it either. We need to start early, with simple things like giving our children an allowance and then coaching them to save a portion and then make smart choices on how they spend the rest. We need to instill in them the importance of a good credit rating, rather than having them tell creditors we're not home or they've reached a wrong number when they call. We need to lead by example and stop this cycle of financial abuse in which too many black people find themselves.

We also need to patronize black-owned businesses and utilize black-owned banks—but we'll talk about that one at length in the near future.

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