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The subprime mortgage crisis may be a racially charged issue, according to a new report from NYU's Furman Center for Real Estate and Urban Policy. The research found that individuals are more likely to receive subprime loans if they live in neighborhoods with a higher percentage of nonwhite residents.
"As the country struggles to recover from an unprecedented housing downturn and neighborhoods suffer from record rates of foreclosures, it's critical to understand how we got here," said Ingrid Gould Ellen, co-director of the Furman Center. "We wanted to understand what fueled the high rates of subprime lending and, in particular, what explains the large racial disparities in subprime lending."
Civil rights and housing advocates argue that the subprime mortgage crisis and subsequent foreclosures have disproportionately harmed black and Latino neighborhoods.
The Furman Center report found that in 2007, the percentage of black borrowers in New York City that received subprime loans was seven times the percentage for white borrowers.
According to Ellen, the Furman Center's findings resemble those of other studies that reveal how racial residential segregation negatively affects minority residents.
"The fact that there is such a strong relationship may suggest that subprime lenders were targeting neighborhoods with largely minority populations," Ellen said. "It also may reflect underlying neighborhood characteristics, such as the scarcity of traditional banking institutions in the neighborhood."
Ellen added that additional work is needed to find more conclusive evidence.
