A new study reveals that the large number of foreclosures that led to the nation’s housing crisis was triggered by predatory lenders targeting poor minority neighborhoods. The study published in the American Sociological Review found that racially-segregated minority neighborhoods were beset with unreasonable fees and interest rates by lenders beginning in the 1990s.
Because lenders could pool high- and low-risk loans to sell on the secondary market, the study’s authors say, minority areas tended to have lenders that “charge high fees and usurious rates of interest” – such as pawn shops and check cashing services. The study, which analyzed data from the 100 biggest U.S. metro areas, found that African-Americans were more likely to receive subprime loans than white borrowers with similar credit. The report’s authors concluded:
As a result, from 1993 to 2000, the share of subprime mortgages going to households in minority neighborhoods rose from 2% to 18%. In 2008, a federal lawsuit claimed that black neighborhoods in Baltimore were disproportionately affected by the subprime mortgage fallout.
It’s both legally and morally wrong for the predatory lenders to do what they did in poor minority neighborhoods. It’s good to see both the federal and state governments finally taking a serious look at the overall problem.
Source: Reuters and CBS News
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.