A study conducted by an umbrella of organizations including the Neighborhood Economic Development Advocacy Project in New York concludes that there were additional pressures on black and Latino borrowers to take the high-risk subprime mortgages that have now become such a huge problem:
The survey focused on lending to minority urban markets in New York, Los Angeles, Chicago, Boston, Cleveland, Charlotte, North Carolina, and Rochester, New York. 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. . .Advocacy groups have said poor and minority borrowers who qualified for traditional loans were nevertheless steered into risky adjustable mortgages.
I don’t know the methodology of the study and I don’t discount the possibility that race may have played a factor in lending schemes for some companies, but I do note that there is no indication in this report that income levels were factored into the equation. Certainly in the City of Rochester, poorer neighborhoods have been more blighted by subprimes and foreclosures than, say, those neighborhoods bordering Brighton. And in many cases, those neighborhoods have a higher concentration of minorities. Since lower-income people were largely targeted for subprimes, once might draw the wrong conclusion unless income was taken into account.
In fact, the article seems to suggest that this study was based on communities rather than borrowers, which if true, is way off the mark scientifically speaking. To say that communities were targeted is different than saying race was targeted: that poor communities and minority communities tend to coexist in this country is another sin altogether.
And once again, we find that this report perpetuates the wrong-headed thinking that has predominated coverage of the ARM crisis:
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.
To re-re-reiterate the point, sinking property values are the reason that the current crisis is upon us, not the effect of said crisis. And lower tax bases are the inevitable result of lowering property values. Also, since the crisis is moving up the economic ladder, it’s probably premature to think that only those neighborhoods cited in the report will face increased foreclosure. There’s plenty of fancy homes sitting with for-sale signs out front, believe it.