Michelle Singletary

Washington, D.C.

Michelle Singletary writes the nationally syndicated personal finance column The Color of Money, which appears in The Washington Post on Wednesdays and Sundays. Her award-winning column is syndicated by The Washington Post Writers Group and is carried in dozens of newspapers nationwide. She has written three personal finance books, including her latest, “The 21-Day Financial Fast: Your Path to Financial Peace and Freedom.” Singletary was the financial expert for “The Revolution,” a daytime program on ABC. For two years, she was host of her own national television program, “Singletary Says,” on TV One. She is a frequent contributor to various NPR programs and has appeared on national talk shows and television networks, including “Oprah,” NBC’s “Today,” “The Early Show on CBS” and CNN. In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges. As part of this ministry, she and her husband also volunteer to teach financial literacy to prison inmates. She is a graduate of the University of Maryland at College Park. She has received the Distinguished Alumni Award from Johns Hopkins University, where she earned a master’s degree in business and management. To stay informed about various money issues subscribe to Michelle’s weekly retirement and personal finance newsletters, which will be delivered to your inbox every Monday and Thursday.

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MICHELLE SINGLETARY COLUMN

Advance for release Sunday, Oct. 25, 2020, and thereafter

(For Singletary clients and FOR PRINT USE ONLY)

By MICHELLE SINGLETARY

(c) 2020, The Washington Post

EDITOR'S NOTE: In a 10-part series titled "Sincerely, Michelle," Michelle Singletary gets personal about common misconceptions involving race and inequality. This is the fifth column in the series, but each column also stands alone.

- - -

Dear Reader,

Let me tell you about where I live.

On my early-morning walks with my Yorkie mix Simba, we often encounter small families of deer, which see so many human walkers and runners in my neighborhood that they glance up but don't dash away. If I'm not in a rush, I'll stop to watch geese swim in the two ponds we pass.

My two-story, two-car-garage Colonial home, tucked into a cul-de-sac, sits on close to an acre of land and backs onto a wooded area. My deck wraps around the back of the house with a screened-in gazebo. There's an unspoken rivalry between the neighbors over who can keep their grass so plush and green it looks like carpet. At night, the sound of the frogs and owls can lull you to sleep.

My "hood" is idyllic, except for one thing.

The value of my home in Prince George's County, Maryland, would be significantly higher if my husband and I weren't Black - and if all our neighbors weren't Black.

Pick up and move our Black neighborhood of doctors, teachers, police officers, and small-business owners just 20 miles west to a White subdivision with a similar economic makeup, and our homes would easily be worth 40% more. This is true for other Black communities around the country, where homes can be undervalued by as much as 65%.

This is the legacy of systemic racism that our government created and, in many ways, still isn't doing enough to eradicate.

The key to the net worth of most Americans isn't a stock portfolio, but the equity accumulated in their homes. It's this equity that has created generational wealth for many White Americans. This wealth can fund college educations or finance small businesses. But homeownership, which is so central to the American Dream, has been and far too often remains an unequal and financially frustrating experience for Black families.

The 2019 Federal Reserve Survey of Consumer Finances shows that 45% of Black families own their homes, with a median home value of $150,000. That compares to a 73.7% homeownership rate for White families, with a median home value of $230,000.

Those gaps -- homeownership compounded by home value -- are a major reason the typical White family has almost eight times the wealth of a typical Black family. And these gaps are directly linked to "redlining," which has robbed Black families of generational wealth.

Federal housing policies starting in the 1930s resulted in a practice of color-coding maps to designate certain neighborhoods as best or worst for mortgage lending. Borrowers buying in White communities - colored green for being safest for lending - could get loans backed by the federal government. Black neighborhoods -- colored red -- were deemed too risky for mortgage lending. Without the federal guarantee, banks wouldn't lend to Blacks. Blacks were often forced to purchase homes under predatory contracts that were so financially onerous many ended up being evicted.

In my own journey to understanding the disparity in homeownership rates and home values, I read "Color of Law: A Forgotten History of How Our Government Segregated America," by Richard Rothstein, a distinguished fellow of the Economic Policy Institute. Rothstein traces the roots of real estate discrimination, arguing that for too long we've shifted the blame to Blacks rather than own up to the federal government's significant part in creating a "caste system" that has denied families of color the opportunity to build wealth. Government policy specifically told developers of suburban neighborhoods they could not sell homes to Blacks.

"The maps had a huge impact and put the federal government on record as judging that African Americans, simply because of their race, were poor risks," Rothstein wrote.

Although the government built public housing complexes to accommodate the need for more affordable housing, it deliberately segregated these communities. And its urban development plans for Blacks lacked the same amenities, funding for schools, or access to jobs and other services as public housing built for Whites.

The Federal Housing Administration (FHA), created in 1934, instituted a policy of not guaranteeing mortgages for Blacks, no matter how creditworthy they were. And after World War II, the Department of Veterans Affairs denied Black veterans the lower-cost government-guaranteed mortgages that White veterans used to help build wealth for their descendants. Although the passage of the Fair Housing Act of 1968 helped increase total Black homeownership, which peaked in 2000 at 47.3% of Black Americans, it hasn't made things equal, because too much racism is baked into the disparity in housing.

I've been a homeowner pretty much all my adult life. I rented for just one year after graduating from college because my grandmother wouldn't leave me alone until I became a homeowner. I've bought and sold two homes. My husband and I built the home we now occupy with our three children. It infuriates me that homes in nearby White neighborhoods have steadily increased in value - even accounting for the period when property values dropped during the Great Recession.

One persistent myth about the racial wealth gap is that Blacks have themselves to blame because they aren't as financially responsible as Whites. But like so many other things - even when controlled for income, education, and creditworthiness - homeownership just doesn't deliver the same wealth for Blacks as it does for Whites.

"Politicians and advocates have long touted homeownership as the best way to build wealth, saying that over the long term, home values go in only one direction: up," wrote Tim Henderson in a 2018 report for Stateline, an initiative of The Pew Charitable Trusts. "But since the dawn of the 21st century, that promise has been an empty one for many African Americans."

The Stateline analysis of federal data found that in nearly 20% of the Zip codes where most homeowners are Black, home values had decreased since 2000, compared with only 2% in neighborhoods where Blacks were the minority.

There's a significant difference in home values even when a neighborhood consists of affluent Black homeowners. Just look at Olympia Fields, a wealthy Chicago suburb, the Stateline report says. "Once a majority-White community and now one of the wealthiest and best-educated majority-Black municipalities in the country, [it] has about the same home prices as it did in 1990."

Between 1996 and 2018, the median home value in neighborhoods previously labeled as "best" for mortgage lending rose 230.8% to $640,238, according to a report by the home-sale marketing company Zillow. The median value in the areas redlined as "hazardous" based on race climbed just 203.1% to $276,199.

"It's a striking example of how discrimination - financial and racial - codified nearly a century ago continues to affect homeowners and whole communities," a Zillow economist wrote.

It's this stark difference in home appreciation that keeps many Whites from buying homes in predominantly Black communities - unless a neighborhood becomes too trendy to ignore. When this happens, home prices soar and become out of reach for many Blacks, who are still dealing with employment discrimination.

Blacks even face higher tax assessments than White homeowners. Black and Hispanic residents have a 10% to 13% higher tax burden for the same bundle of public services as White residents, according to a working paper by economists Troup Howard of the University of Utah and Carlos Avenancio-León of Indiana University.

You keep asking me, "What's your solution?"

The move forward has to begin with you acknowledging that redlining still exists. Stop minimizing the damage that has been done by discriminatory housing policies. Maybe then we can agree on remedies -- such as funding more first-time homebuyer programs, which is what I used to purchase my first home.

My husband and I have plans of downsizing one day, and we hope we'll be able to help our children become homeowners, perhaps giving them enough money that they won't even need a mortgage. This is what I dream about on my long walks with Simba.

Sincerely,

Michelle

- - -

Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

MICHELLE SINGLETARY COLUMN

Advance for release Wednesday, Oct. 21, 2020, and thereafter

(For Singletary clients and FOR PRINT USE ONLY)

By MICHELLE SINGLETARY

(c) 2020, The Washington Post

WASHINGTON -- At first, the IRS said inmates were eligible for stimulus payments up to $1,200.

Then the agency walked back that decision, telling correctional facilities to intercept stimulus checks that the agency had already issued. Spouses of the inmates were told they had to return the part of relief money intended for incarcerated individuals.

The Coronavirus Aid, Relief, and Economic Security (Cares) Act provides economic impact payments or stimulus payments of up to $1,200 for individuals and $2,400 for taxpayers filing a joint tax return. There was nothing in the law prohibiting prisoners from receiving stimulus payments.

A class-action lawsuit was filed on behalf of inmates in local, state and federal facilities, arguing that the IRS actions were unlawful. Judge Phyllis Hamilton of the U.S. District Court for the Northern District of California agreed, saying the decision to withhold the stimulus payments was "arbitrary and capricious." Hamilton ordered the Treasury Department and the IRS to send the relief money and to do so within certain deadlines.

Still not chastened, the Trump administration appealed. Last week, Hamilton again smacked away efforts by the government to stop the distribution of the payments, entering a final summary judgment. And the judge is making the IRS give inmates additional time to claim their stimulus money, moving an initial Oct. 30 deadline to Nov. 4.

The judge also ordered that the IRS send out a notice that correctional facilities officials should give to prisoners about the court's decision. The agency would also need to mail blank 1040 forms for inmates and instructions on how to fill out the paper return to ensure that every eligible person in each facility has a packet in time to file a claim, said Kelly Dermody, a partner with San Francisco-based Lieff Cabraser Heimann & Bernstein, one of the law firms representing the plaintiffs and class-action members.

The plaintiffs are also represented by the nonprofit Equal Justice Society, which advocates against inequities in the criminal justice system.

"Hopefully this is the last of it," Dermody said. "They have already wasted a lot of taxpayer money chasing after checks that were previously properly issued, misleading correctional authorities about eligibility, and filing brief after brief in court trying to stop our fellow Americans from getting stimulus money."

Inmates who filed a 2018 or 2019 tax return, received Social Security benefits or Railroad Retirement benefits in 2019, or previously registered with the IRS through the non-filers portal should get an automatic payment in the mail or by direct deposit.

Because incarcerated individuals are generally not allowed access to a computer, they will have to fill out and postmark a simplified Form 1040 federal return by Nov. 4.

For those capable of going online, there's more time to claim a stimulus payment. The deadline to use the agency's online non-filers tool at irs.gov is Nov. 21.

The economic impact payment is an advance credit for 2020. Under the Cares Act, payments must be made by Dec. 31. If people don't receive a payment by then, they won't receive their stimulus funds until they file a 2020 federal return next year.

By Nov. 9, the government has to confirm the number and amount of stimulus payments distributed as a result of the court order.

As a result of the class-action lawsuit, the IRS is required to reconsider any claim for a stimulus payment that was previously denied. The court order directs the IRS to automatically reprocess stimulus claims by Oct. 24. If you've already used the non-filers tool, you should automatically get a stimulus payment.

If you are in the group whose payment is being reprocessed, that doesn't mean the check will arrive by Oct. 24; it may be delivered many weeks later, Dermody said. Keep in mind, the IRS is still experiencing delays in processing stimulus payments and tax refunds because of the pandemic.

However, after the Oct. 24 deadline, go to irs.gov and use the "Get My Payment" tool to ensure a payment has been scheduled.

Unfortunately, you won't find a lot of information on the IRS website. If you have questions about the recent order, the most helpful information can be found in a FAQ at caresactprisoncase.org. Particularly useful is a link to a sample Form 1040 with highlighted instructions on how to fill out a 2019 return, including writing "EIP 2020" on the top of the form. If the person is still in a correctional facility, it also shows where to add the personal corrections number to make sure the stimulus check is sent to the right location and person.

If you still have questions - and you should read the entire FAQ - there's a contact form to get additional assistance from attorneys working on the class-action case.

- - -

Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

(c) 2020, Washington Post Writers Group

Michelle Singletary COLUMN

Advance for release Sunday, Oct. 18, and thereafter

(For Singletary clients and FOR PRINT USE ONLY)

WRITETHRU: In 27th graf, 1st sentence, changes to "One quick way to tank your credit history..."; and in 28th graf, removes final sentence.

By Michelle Singletary

(BEG ITAL)EDITOR'S NOTE: In a 10-part series for Sundays titled "Sincerely, Michelle," Michelle Singletary gets personal about misconceptions involving race. This is the fourth column in the series, but each one stands alone as well.(END ITAL)

Dear Reader,

It's funny how certain memories stick with you - like the time my grandmother Big Mama cussed out a customer representative calling about her auto loan. The lender was trying to say my grandmother had missed making her monthly car payment, even though she always paid her bills not just on time but early.

Big Mama was in the doorway of the kitchen, talking on the rotary telephone. I was watching television not far away.

"No, sir, you better check your records," my grandmother said, punctuating her point with some very salty language.

The one thing you never did was accuse Big Mama of being late for anything, especially her financial obligations. That woman would pace near the front door of her Baltimore rowhouse waiting for the letter carrier so she could go pay whatever bill arrived that same day.

During that phone call, Big Mama pulled out the little red book where she jotted down her financial information and read names, dates and amounts to prove her payment was made. By the time my grandmother was done, I felt sorry for the person on the other end of the line.

I was thinking of Big Mama the day I found out that I had a perfect 850 credit score on four different credit scoring models. If my grandmother was still living, I would have rushed over to show her.

"Don't ever be late with the White man's money," Big Mama would preach. This was her legacy to me, the constant worry about ruining your credit history because, for her, a late payment meant being further marginalized.

Yet another misconception about Blacks is that we are financially irresponsible, as evidenced by disproportionately lower credit scores. But if you trace the root cause of the poor credit histories, you'll find a pattern of discriminatory practices.

In America, we like to think that everyone has an equal opportunity to succeed, that meritocracy - skills and effort - eliminates bias. You've heard the pull-yourself-up-by-your-bootstrap tropes that all come down to this: If you work hard enough and save, you, too, can be financially secure - even rich.

But the legacy of slavery endures and Blacks must make extraordinary efforts to overcome the discrimination that is often hidden in policies or, in the case of credit scoring, products that purport to be race-neutral.

Please, don't shake your head, thinking, "Stop making excuses for the failure of Black people to lift themselves up."

To this, I would argue, if you purposely - or even unintentionally - trip someone and he or she falls and gets hurt, you can't turn around and say, "It's your fault you fell. You should have watched where you were walking."

America has got to stop tripping Black people.

Look at the calculation of credit scores, which help lenders assess risk when granting credit, insuring autos or deeming someone responsible enough to rent an apartment. Credit scores typically go from 300 (bad) to 850 (excellent). The most widely used is the FICO. Its chief rival is VantageScore, a scoring model that is a joint effort by the three major bureaus - Equifax, Experian and TransUnion.

Before the advent of the three-digit credit score, a consumer loan depended in large part on a face-to-face application process. What stood between you and a home or auto loan was a White male lending officer. This is why my grandmother was obsessive about her bill-paying habits.

The credit score is supposed to eliminate bias. The 1974 Equal Credit Opportunity Act barred credit score systems from using such information as sex, marital status, national origin, religion - or race.

This would lead one to think that credit score calculations can't be biased. But factors that are included or excluded in the algorithms used to create a credit score can have the same effect as lending decisions made by prejudiced White loan officers.

Although credit scoring models can't directly use a consumer's race to calculate a score, there are other less obvious ways that the system puts Blacks at a disadvantage.

Decades of discrimination in employment, lending policies, debt collection, and even criminal prosecution have left Black families struggling to make ends meet. Let me walk you through how that dings credit scores.

One path to achieving a good credit score is a history of responsible credit usage. The ability to get a mortgage and pay it on time can have an extremely positive impact on your credit score.

Blacks still have to contend with "redlining," a rating system endorsed by a federal government agency - the Home Owners' Loan Corporation - that designated Black neighborhoods as too risky for mortgage lending. A 2018 study by the National Community Reinvestment Coalition (NCRC) found that "while overt redlining is illegal today, having been prohibited under the Fair Housing Act of 1968, its enduring effect is still evident in the structure of U.S. cities." Access to credit is "an underpinning of economic inclusion and wealth-building in the U.S.," the report said.

To fill some of the lending gap, Black-owned banks stepped in to serve Black communities. But the number of Black-owned banks has declined by more than 50% since 2001, according to a recent Urban Institute report.

So Blacks discriminated against in mortgage lending, often turn to higher-cost predatory loans. Or, they just rent.

But rental payments are not included in older credit scoring models. Although some lenders have updated to newer scoring models that include a loan applicant's rental payments, many have not. The failure to consider these payments and other bills - such as utility or cellphone payments - disproportionately hurts Blacks.

The route to a good credit score is to pay your bills on time. But Blacks already economically behind because of systemic racism have less to fall back on when a financial crisis hits. This, in turn, results in a hit to their credit scores.

One quick way to tank your credit history is to get a court-ordered judgment. And Black borrowers are more likely to fare badly when taken to court by their creditors. Debt-collection lawsuits that end in default judgments also disproportionately go against Blacks, according to a 2020 Pew Charitable Trusts report.

What happens next creates a negative-credit snowball. A crisis hits, and Black borrowers can't pay their debts. They already are more likely to be underpaid. Reports have shown creditors are more likely to sue Black borrowers.

"Debt collection lawsuits that end in default judgment can have lasting consequences for consumers' economic stability," the Pew report said. "Over the long term, these consequences can impede people's ability to secure housing, credit, and employment."

The disparity in criminal justice that treats Blacks far more harshly than Whites for similar crimes has created a pipeline to prison, starting with the harsher disciplining of Black school children.

When ex-offenders fill out job applications, many have to check a box indicating whether they've been convicted of a crime. That checked box becomes a brand that prevents them from getting jobs or even interviews. The NAACP and the National Employment Law Project support "ban the box" initiatives that have led to legislation to prohibit hiring policies that screen out Black applicants without assessing the nature and gravity of each case individually.

"When returning offenders can find and keep legitimate employment, they are more likely to be able to pay restitution to their victims, support their children, and avoid crime," a 2010 report by Pew points out.

And, by the way, racist policies thwart Blacks no matter how responsible they are. Blacks are consistently charged higher interest rates on home and auto loans even when controlled for the amount financed, term of the loan, and creditworthiness.

Credit inequality matters. It contributes to the wealth gap. And part of closing that gap is acknowledging and eliminating systems that, intentionally or not, have been tripping up Blacks.

Sincerely,

Michelle

About
Michelle Singletary writes the nationally syndicated personal finance column The Color of Money, which appears in The Washington Post on Wednesdays and Sundays. Her award-winning column is syndicated by The Washington Post Writers Group and is carried in dozens of newspapers nationwide. She has written three personal finance books, including her latest, “The 21-Day Financial Fast: Your Path to Financial Peace and Freedom.” Singletary was the financial expert for “The Revolution,” a daytime program on ABC. For two years, she was host of her own national television program, “Singletary Says,” on TV One. She is a frequent contributor to various NPR programs and has appeared on national talk shows and television networks, including “Oprah,” NBC’s “Today,” “The Early Show on CBS” and CNN. In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges. As part of this ministry, she and her husband also volunteer to teach financial literacy to prison inmates. She is a graduate of the University of Maryland at College Park. She has received the Distinguished Alumni Award from Johns Hopkins University, where she earned a master’s degree in business and management. To stay informed about various money issues subscribe to Michelle’s weekly retirement and personal finance newsletters, which will be delivered to your inbox every Monday and Thursday.

Archives

Read all of Michelle's Newsletters Read all Color of Money Discussions
Books
  • "The 21 Day Financial Fast: Your Path to Financial Peace and Freedom"
  • "Spend Well, Live Rich: How to Get What You Want with the Money You Have"
Links