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Academic

: The Faculty Lounge

Brown on Racial Aspects of Subprime Lending

By Alfred Brophy

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My colleauge Carol Brown has a new paper, Intent and Empirics: Race to the Subprime, up on ssrn, which turns to FHA filings to dissect the racial disparities in subprime lending.  She links that empirical evidence with qualitative evidence of what accounts for at least some of those disparities.  Her abstract is as follows:

The United States? history of racially discriminatory banking, housing, and property policies created a community of black Americans accustomed to exploitative financial services and vulnerable to victimization by subprime lenders. My thesis is that black borrowers are experiencing a new iteration of intentional housing discrimination in the twentieth and twenty-first centuries; lenders identified a vulnerable ?emerging market? of black homeowners and borrowers and knowingly targeted them to receive subprime or predatory loan products when equally situated white borrowers were given superior, prime mortgage products.

This Article explores how disparate lending practices coupled with banking deregulation undermined the Congressional push for increased minority homeownership and widened the already burgeoning wealth divide. Millions of borrowers who accepted subprime loans between 1998 and 2006 already have or will lose their homes to foreclosure, resulting in a net loss in homeownership for nearly one million families. Blacks are disproportionately represented among the subprime victims, especially black women. The lending and financial services structure that caused this crisis is complicated by evidence of redlining and of steering blacks into subprime loans, all of which contributed to the present foreclosure crisis. This subprime dilemma merely adds new terminology to a long history of racial discrimination in housing in America. In the end, this Article argues that the search for an understanding of the cumulative events that facilitated the exploitation of blacks by subprime lenders illuminates the institutional and national impediments to reversing the present and future harm of the subprime crisis and to ensuring blacks equal access to one of the benefits of full citizenship ? property.

First, in Part II, I contend that the disparities in subprime lending experienced by black borrowers and especially by black women result from intentional reverse-redlining and steering by lending institutions, their loan officers, and brokers. Next, in Part III, I consider why blacks and black women are disproportionately victims of subprime mortgages and of predatory lending. Finally, Part IV concludes by discussing the after-effects of subprime and predatory lending and offers possible solutions for rethinking how blacks are to overcome this deeply profound experience with housing discrimination which I suggest made blacks prime subprime victims. It focuses on the property dilemma or rather the dilemma of the landless.

I think a lot of people are going to be talking about this article.

Full post as published by The Faculty Lounge on June 28, 2009 (boomark / email).

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