Loans

After the war when many low cost housing developments were being built the mortgage rules were difficult to qualify for a loan. The Housing Act of 1950 lowered the money down needed and extended the loan times. Even with the 3.5% down and 25 year loan many could not quality because of income ratios. The standard rule was that your principal and interest payment plus taxes and insurance could not exceed 28% of your income. At that time new homes cost $10,000 and the average income was $3,300. This meant that many Black families did not have the needed income to get a loan. A classic case of the unintended consequences of good intentions began in 1968 and ended in the culmination of the 2008 mortgage crises and the aftermath is still with us in the form of high rental cost The 1968 Act put pressure on banks to accept more mortgages from Blacks and they complied. It time many of these Black families were unable to make the payments and they lost their homes. In 1977 the Community Reinvestment Act demanded that banks offer loans to low income people. This once again caused low income borrowers to lose their homes. Finally in the mortgage crisis of 2008 banks offered loans to people of all colors who could not meet the monthly payments and once again people lost their homes. Because so many lost their homes and were forced to rent the cost of renting rose rapidly and today many people cannot afford a place to live. In all three of these cases the Blacks suffered a disproportional loss of homes.