NYU Study Finds that Minorities May Be Target of Subprime Mortgages
By Foreclosure Fighter staff writer
The number of home foreclosures has been skyrocketing out of control this year, according to reports from every major housing organization across the United States, and subprime mortgages are an integral part of this alarming trend.
Many different types of homeowners from all income levels have been affected by the housing crisis. Certainly geographical location has a lot to do with foreclosures as well, since many areas of the country such as California and Florida are seeing the lion's share of foreclosures across the country due to housing booms in previous years.
However, few experts have made speculations about other social factors related to the subprime crisis and its consequent affect on foreclosures. Now, a new report from the Furman Center for Real Estate and Urban Policy at New York University points to race being a possible target for predatory lenders.
Comparing homeowners with similar income levels across neighborhoods in New York City, the study found that those in predominantly black or Hispanic neighborhoods were more likely than those in predominantly white neighborhoods to receive their loans from a subprime mortgage lender.
Subprime mortgages of course are more difficult to maintain because of higher interest rates, fees and penalties and thus are more likely to lead to foreclosure. Subprime borrowers have also been found to be the target of credit card companies and others who would seek to profit from those with typically poor credit histories.
Detractors may object that a neighborhood in a culturally diverse city such as New York is difficult to connect to one particular race, and even that a typical borrower from one neighborhood may not be favorably compared to a typical borrower from another.
However, the raw numbers from the Furman center study are hard to deny. For example, in Jamaica, Queens, a predominantly black neighborhood with a median income of $45,000 in 2005, an astounding 46 percent of mortgages were issued by subprime lenders, which is the second highest rate in the city.
In contrast, Bay Ridge, Brooklyn, a mostly white neighborhood with a similar median income of $50,000, featured one of the lowest rates in the city, with 3.6 percent of home loans coming from subprime lenders.
Yet even with all the data collected by the Furman Center, there is no direct evidence that subprime lenders are actively pursuing policies that are racially discriminatory. There are many factors to be considered, the most important of which is the subprime borrowers' credit histories, which dramatically impact for which loans a potential borrower may qualify.
The New York State Division of Human Rights is currently investigating the matter to see if minority communities are being singled out by subprime lenders.
Regardless of their findings, these foreclosure stories will certainly come up more often during discussions of how to deal with the subprime mortgage and housing crisis, since any approach on housing reform will have to take into account the often sordid practices of subprime lenders across the board.