Thursday, December 6, 2007
According to this brief titled "African Americans and Homeownership: The Subprime Lending Experience,1995 to 2007" from the Joint Center for Political and Economic Studies, even after controlling for comparable risk factors as well as borrower and lender characteristics, blacks and other ethnic minorities were wildly overrepresented in the subprime market for home purchase, home improvement and home refinance loans. There was also a direct correlation between states with a high proportion of subprime loans and states with a high proportion of black residents. Ditto for predatory loans and ZIP codes with predominantly minority populations.
Oddly enough, blacks in predominantly wealthy neighborhoods were three times as likely to take out subprime refinance loans as people in wealthy neighborhoods overall. Compare that to blacks in predominantly poor neighborhoods, who were only one and a half times as likely to take out subprime loans as people in predominantly poor neighborhoods overall. Leaving the brief's authors to wonder whether the expectation of racist lending practices doesn't lead qualified black borrowers to forego the more above board financing options and head directly to the predatory lenders that are happy to see them walk through the door.