The nice young lady would in this hypothetical be an independent broker, or working as an originator for a larger lender. She might even be simply an earnest striver, who didn’t realize that the 1% figure was simply a teaser rate and that there would be a swinging payment reset if the borrower kept paying the minimum for a number of years. A prevalence of African-Americans brokers and originators in the sub-prime markets (as opposed to, say, Chase, Citi, Wells Fargo) would also explain why upper-income African-Americans were getting these awful loans.

I am a real estate broker. The first transaction I was involved with showed how the sub-prime product is supposed to work. The buyer had a good civil service job and was looking to buy a place in a decent area. She had been taking care of an elderly lady who lived in one side a two-family home, in return for living in the other side for a much reduced rent. The owner was now moving into an assisted living community and selling the two-family house. Unfortunately, the buyer’s credit was not the best. The terms of the sub-prime loan reflected the credit.

In this case, the good news was that by diligently making the payments for two years, the person was able to develop a good enough credit history to be able to qualify for a more normal loan. She also had her own lawyer (provided through her union) who emphasized the absolute need to refinance the sub-prime loan in two years. I think having good, independent legal representation (as opposed to relying on the lender’s own lawyers, as so many people do not knowing better) was the fundamental difference between this story and the sad situations that have been happening.