Report: Minorities Hit by Foreclosures

Before you go, we thought you'd like these...
Before you go close icon
SAN FRANCISCO (March 6) - Subprime lenders that went out of business
with the industry's collapse targeted minority neighborhoods,
leaving them to struggle disproportionately with foreclosures and
crumbling home values, according to a new report.
These companies' high-risk loans made up 20 percent of all loans
in predominantly minority communities, compared with 4 percent of
total loans in mostly white areas, according to

SAN FRANCISCO (March 6) - Subprime lenders that went out of business

with the industry's collapse targeted minority neighborhoods,

leaving them to struggle disproportionately with foreclosures and

crumbling home values, according to a new report.

These companies' high-risk loans made up 20 percent of all loans

in predominantly minority communities, compared with 4 percent of

total loans in mostly white areas, according to the report released

Thursday by an alliance of policy, research and advocacy

organizations.

"These high risk lenders were targeting their loans to

particular neighborhoods - to communities of color," said Saara

Nifici of the Neighborhood Economic Development Advocacy Project in

New York, one of the organizations participating in the study.

"That's where they focused their marketing practices."

Part of their growth in those areas can be explained by the lack

of other available resources - simply not having another lender in

the neighborhood, Nifici said. But researchers believe there's more

to the issue.

"It's a question of access and a question of steering," Nifici

said. "If you walk into the local subprime office, there's no

incentive for them to send you to a different lender where you can

qualify for a prime loan. People are steered downward, not

upward."

The study analyzed the geographic operating patterns of 35

high-risk lenders that were very active in 2006 but that went

bankrupt, were closed or sold in 2007 as the industry imploded.

Chief among them were New Century Mortgage Corp., WMC Mortgage

Corp., Fremont Investment & Loan, and Argent Mortgage Co.

The survey focused on lending to minority urban markets in New

York, Los Angeles, Chicago, Boston, Cleveland, Charlotte, N.C., and

Rochester, N.Y. In six of these seven urban areas, high-risk

lenders' market share in minority neighborhoods was at least three

times the share in white neighborhoods.

Many subprime loans to borrowers with blemished credit or low

incomes featured low introductory or "teaser" rates. When the

adjustable mortgages reset to higher rates, it made the monthly

payments unaffordable for many people and put their homes at risk

of foreclosure.

Advocacy groups have said poor and minority borrowers who

qualified for traditional loans were nevertheless steered into

risky adjustable mortgages.

The concentration of subprime loans happened in low-income

areas, but also in middle-class minority communities like the

predominantly African- and Caribbean-American areas of southeast

Queens in New York, Nifici said.

In these cases, "race and ethnicity played a bigger part" in

lending decisions than income, she said.

This concentration means these minority communities will

shoulder most of the negative impacts of the subprime crisis -

foreclosures, sinking property values, lower tax bases, abandoned

homes and higher crime.

The report recommended that policy makers protect borrowers and

tenants from foreclosures and pass mortgage reform legislation.

The city of Baltimore filed a federal lawsuit against Wells

Fargo Bank in January, alleging the bank intentionally sold

high-interest mortgages more to blacks than to whites in violation

of federal law and targeted black neighborhoods for high-risk and

unfairly priced loans.

Wells Fargo has said it does not consider race when making

loans.

On the Net:

Neighborhood Economic Development Advocacy Project:

http://www.nedap.org

Read Full Story

Find a New Home

Buy
Rent
Value
Powered by Zillow

From Our Partners