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Carolina and her son

IASP Events

The Untold Costs of Subprime Lending: The Impacts of Foreclosures on Communities of Color in California

The Heller School, April 15, 2009

Foreclosures across the country have been focused in communities of color following recent patterns of subprime mortgage lending.  IASP invited Carolina Reid, of the San Francisco Federal Reserve Bank, to the Heller School to present her latest results from her unique research on this topic looking at California data, and asked Jim Campen from Americans for Fairness in Lending (AFFIL) to be the discussant.

After a welcome from the Dean of the Heller School, Lisa Lynch, Carolina presented preliminary data suggesting that differential lending patterns to communities of color explain a significant portion of the higher foreclosure rates in these neighborhoods.  African Americans and Latinos in California had access to very different mortgage markets from whites and were more likely to get subprime adjustable rate mortgages through independent mortgage companies (mortgage brokers and mortgage lenders).  In turn, these subprime mortgages made through independent mortgage companies were far more likely than prime mortgages to become delinquent (over three months past due) and enter foreclosure.  Jim Campen's comments on the paper focused on the need for policy solutions, as well as provided additional data for Boston showing the spatial relationship between communities of color and the location of subprime mortgages and foreclosures.

This research supports previous work Carolina has done indicating that financial institutions governed by the Community Reinvestment Act (CRA) are less likely than independent morgage companies to have mortgages in foreclosure.  Carolina's research is based on a unique dataset merged from a proprietary database and publicly available Home Mortgage Disclosure Act (HMDA) data.

Click here for a copy of the presentation.  For a copy of Carolina's previous CRA report, click here.  For more information please contact Hannah Thomas at (781) 736-3819 or at hthomas@brandeis.edu.