Cartographies of Race and Class: Mapping the Class‐Monopoly Rents of American Subprime Mortgage Capital

Abstract

Hundred-billion dollar writedowns and trillion-dollar stock market fluctuations have drawn worldwide attention to America's subprime mortgage sector, and its linkages with predatory exploitation in working-class and racially marginalized communities. During nearly two decades of stealth expansion, agents of subprime capital fought regulation and reform by a) using the doctrine of risk-based pricing to equate financial innovation with democratized access to capital, b) appealing to the cultural myths of the 'American Dream' of homeownership, and c) dismissing well-documented cases of racial discrimination and predatory abuse as anecdotal evidence of rare problems confined to a few lost-cause places in what is otherwise a benevolent free-market landscape. The current crisis has undermined the third claim, but mainstream policy debates are reinforcing the first two. In this paper, we challenge all three of these ideological claims. Properly adapted and updated, Harvey's (1974) theory of class-monopoly rent explains how the localized, neighborhood exploitations of class and race in urban America have been woven through Wall Street into transnational webs of structured finance and investment. We map the race and class segmentation of subprime mortgage capital across several hundred U.S. metropolitan areas in 2004 and 2006, and we also analyzed the achievements and prospects of several progressive challenges to subprime exploitation. Subprime Goes Prime TimeAmerica's long-running boom in subprime mortgages met its catastrophic end in 2007. For years, an interdisciplinary group of scholars, attorneys, and activists diagnosed the gathering dangers in the sector, which is designed to provide high-cost, high-risk credit to low-income consumers and others with poor credit histories (Carr and

Mortgage Foreclosure and Health Disparities: Serial Displacement as Asset Extraction in African American Populations

“…35 All of these forms of dispossession resulted in particular geographies of inequality inscribed in different historical eras from the concentration of African Americans during slavery and reconstruction in the South through their segregation in inner-city neighborhoods in the North to the racial targeting of subprime loans to neighborhoods of color and subsequent foreclosures. 4,36 …”

“…42 Low-income people, people of color, and their neighborhoods are no longer denied access to mortgage credit, but rather are granted access on highly unequal terms. 1,3,4,36 The limited or bad credit history arising due to exclusion from mainstream credit, vulnerabilities to predatory marketing tactics produced by generations of financial information asymmetries, and residential segregation that facilitates lender targeting of neighborhoods by race and income have all afforded the construction of new inequalities. [2][3][4]43 For example, African Americans are two to three times more likely than similarly positioned whites to be in the subprime market in metropolitan areas across the United States, with the problem being especially severe in New York City, Cleveland, Chicago, and Newark.…”

“…1,3,4,36 The limited or bad credit history arising due to exclusion from mainstream credit, vulnerabilities to predatory marketing tactics produced by generations of financial information asymmetries, and residential segregation that facilitates lender targeting of neighborhoods by race and income have all afforded the construction of new inequalities. [2][3][4]43 For example, African Americans are two to three times more likely than similarly positioned whites to be in the subprime market in metropolitan areas across the United States, with the problem being especially severe in New York City, Cleveland, Chicago, and Newark. 4,41,44 High-cost subprime lenders have enjoyed market dominance in "areas with deeper legacies of urban decline" in Chicago, 45 extracting equity via refinance and home improvement loans in a process of rent seeking through excessively high interest rates, prepayment penalties, hidden fees and charges, and abusive products such as negative amortization loans.…”

“…[2][3][4]43 For example, African Americans are two to three times more likely than similarly positioned whites to be in the subprime market in metropolitan areas across the United States, with the problem being especially severe in New York City, Cleveland, Chicago, and Newark. 4,41,44 High-cost subprime lenders have enjoyed market dominance in "areas with deeper legacies of urban decline" in Chicago, 45 extracting equity via refinance and home improvement loans in a process of rent seeking through excessively high interest rates, prepayment penalties, hidden fees and charges, and abusive products such as negative amortization loans. Thus, the penetration of inner-city markets by subprime mortgage capital has subjected communities that experienced urban disinvestment to another form of exploitation.…”

“…African Americans have been more likely to experience mortgage delinquency and foreclosure, especially as a result of subprime loans. [1][2][3][4] The argument of this paper is that these historical experiences of disadvantage are not independent, rather ongoing racialized policies and practices transmit housing and health inequalities from one generation to the next. Higher rates of mortgage delinquency and foreclosure among African Americans result from a history of racially specified dual housing markets.…”