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Buchanan v. Warley
An exploitative system of home financing often used by blockbusters and predatory lenders, which was the only way of purchasing a home for many African Americans through the 1960s, and which still exists in the 21st century, after the 2008 financial crisis destroyed the ability of many (especially African American) families to access credit. In a normal mortgage, a buyer’s monthly payment to the bank includes both interest and part of the actual cost (principal) of the home that the bank has already paid to the seller. Therefore, a buyer can build equity in their home over time: every month, they own a little more of their home. However, on the contract system, buyers pay only interest every month—usually at a disproportionately high rate—and then are expected to pay the full price of their home all at once, at the end of the loan’s term (usually 15-20 years). This means a buyer builds no equity or wealth over time, and remains at the complete mercy of their bank: specifically, under the contract system, buyers will lose their home if they miss a single monthly payment over 15-20 years, or if they cannot afford to pay the full price of the home at the end of this term. Because blockbusters often sold African Americans homes on the contract system at unrealistically high prices and interest rates, they could evict any family that missed a single payment and resell the same house to a new family, under the same conditions.
Contract buying system Quotes in The Color of Law
The The Color of Law quotes below are all either spoken by Contract buying system or refer to Contract buying system. For each quote, you can also see the other terms and themes related to it (each theme is indicated by its own dot and icon, like this one:
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Chapter 7
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The consequences of racially targeted subprime lending continue to accumulate. As the housing bubble collapsed, African American homeownership rates fell much more than white rates. Families no longer qualify for conventional mortgages if they previously defaulted when they were unable to make exorbitant loan payments; for these families, the contract buying system of the 1960s is now making its return. Some of the same firms that exploited African Americans in the subprime crisis are now reselling foreclosed properties to low- and moderate-income households at high interest rates, with high down payments, with no equity accumulated until the contract period has ended, and with eviction possible after a single missed payment.
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Contract buying system Term Timeline in The Color of Law
The timeline below shows where the term Contract buying system appears in The Color of Law. The colored dots and icons indicate which themes are associated with that appearance.
Chapter 6: White Flight
...at low prices. Unable to get mortgages, African American people bought their houses on a contract system , paying monthly without gaining equity. If they could make every payment for 15-20 years,...
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In Part III, Rothstein explains how, beyond redlining, this contract sale system used by blockbusters also drove black neighborhoods to deteriorate. A historian whose attorney father defended...
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Chapter 7: IRS Support and Compliant Regulators
...subprime mortgage, cannot get a mortgage ever again. Instead, they are forced back into “ the contract buying system of the 1960s.” And these contract buyers often get their new homes from the same...
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