New study shows racial disparities in Twin Cities mortgage lending (Video)

Feb 12, 2009

A new report, "Communities in Crisis," issued by the University of Minnesota Institute on Race and Poverty shows that the Twin Cities has some of the nation's worst racial disparities in mortgage lending. In the Twin Cities, those hardest hit by the subprime lending and foreclosure crisis have been communities of color.

Even with a good income, people of color were substantially more likely to be denied loans, the study found, with black borrowers experiencing the greatest disparities. Black borrowers with incomes exceeding $157,000 faced a 25 percent denial rate, compared with an 11 percent denial rate among whites making $39,250. The same pattern held true for high-income Asians and Hispanics.

Similarly, subprime loans were more common for high- and very-high-income black and Hispanic borrowers than for whites in any income group. Racial segregation of neighborhoods was an added factor in the Twin Cities because they are underserved by prime lending institutions, contributing to higher subprime loan rates for people of color.

This video is not supported by your browser at this time.
U of M professor Myron Orfield discusses his study on minority housing

"Home ownership has been the first step to building stability and wealth for Americans," says Orfield. The disadvantages encountered by low-income families and their neighborhoods during the subprime lending crisis "has cost another generation of people of color the equal opportunity to join America's middle class," he says.

Subprime lending is usually legal, but racial discrimination is not. The Fair Housing Act, Equal Credit Opportunity Act, and Community Reinvestment Act, among others, outlaw racial disparities in home mortgage lending. Federal officials, however, did not aggressively pursue lending discrimination during the subprime boom. And subprime lending disparities became foreclosure disparities.

"Communities in Crisis" found that prime credit is not reaching the segregated, high-poverty neighborhoods that need it most and that the Fair Housing Act was designed to eliminate. Neighborhoods with the highest percentages of people of color had the highest subprime lending and foreclosure rates. These neighborhoods have borne the costs of foreclosure disproportionately both in the form of families losing their homes and cities losing tax resources.

"Strong steps need to be taken to ensure equal access to credit and the promise of home ownership for people of color," Orfield says. The report recommends a multifaceted approach:

• Aggressive enforcement of existing local and national civil rights law.s
• Expansion and rigorous enforcement of the Community Reinvestment Act to monitor lending of non-bank institutions and provide equal access to fair credit.
• Establishment of a Regional Fair Housing Center to help ensure nondiscrimination in housing, rental, and home lending markets and prevent future crises.

Source: University of Minnesota

Explore further: Physicist creates ice cream that changes colors as it's licked

add to favorites email to friend print save as pdf

Related Stories

First in-situ images of void collapse in explosives

1 hour ago

While creating the first-ever images of explosives using an x-ray free electron laser in California, Los Alamos researchers and collaborators demonstrated a crucial diagnostic for studying how voids affect ...

NASA maps Typhoon Matmo's Taiwan deluge

1 hour ago

When Typhoon Matmo crossed over the island nation of Taiwan it left tremendous amounts of rainfall in its wake. NASA used data from the TRMM satellite to calculate just how much rain fell over the nation.

Recommended for you

How dinosaurs shrank, survived and evolved into birds

34 minutes ago

That starling at your birdfeeder? It is a dinosaur. The chicken on your dinner plate? Also a dinosaur. That mangy seagull scavenging for chips on the beach? Apart from being disgusting, yet again it is a ...

Children's book explores Really Big Numbers

49 minutes ago

A new children's book written and illustrated by a Brown mathematics professor Richard Schwartz takes readers on a visual journal through the infinite number system. Schwartz hopes Really Big Numbers will ...

Shrinking dinosaurs evolved into flying birds (w/ Video)

18 hours ago

A new study involving scientists from the University of Southampton has revealed how massive, meat-eating, ground-dwelling dinosaurs evolved into agile flying birds: they just kept shrinking and shrinking, ...

User comments : 0