Racial Dynamics of Subprime Mortgage Lending at the Peak

Bibliographic Data

ID23328433
AuthorsJ W Faber (0000-0003-3829-0181, New York University, corresponding author)
Year2013
Volume23
Issue2
Pages328-349
Publication date2013-04-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueHousing Policy Debate (JOURNAL)
Journal identifiersISSN: 1051-1482 • E-ISSN: 2152-050X
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/10511482.2013.771788
OpenAlexW2079406463
LanguageEN
Citations received104
References cited30

Subprime mortgage lending in the early 2000s was a leading cause of the Great Recession. From 2003 to 2006, subprime loans jumped from 7.6% of the mortgage market to 20.1%, with black and Latino borrowers receiving a disproportionate share. This article leveraged the Home Mortgage Disclosure Act data and multinomial regression to model home-purchase mortgage lending in 2006, the peak of the housing boom. The findings expose a complicated story of race and income. Consistent with previous research, blacks and Latinos were more likely and Asians less likely to receive subprime loans than whites were. Income was positively associated with receipt of subprime loans for minorities, whereas the opposite was true for whites. When expensive (jumbo) loans were excluded from the sample, regressions found an even stronger, positive association between income and subprime likelihood for minorities, supporting the theory that wealthier minorities were targeted for subprime loans when they could have qualified for prime loans. This finding also provides another example of an aspect of American life in which minorities are unable to leverage higher class position in the same way as whites are. Contrary to previous research, model estimates did not find that borrowers paid a penalty (in increased likelihood of subprime outcome) for buying homes in minority communities.

Actuarial science · Business · Demographic economics · Economics · Financialization · Insurance policy · Leverage (statistics) · Mortgage insurance · Mortgage underwriting · Multinomial logistic regression · Receipt · Recession · Shared appreciation mortgage · Finance · Housing Market and Economics · Housing, Finance, and Neoliberalism · Urban, Neighborhood, and Segregation Studies

Tools

Open DOISci-Hub