Segregation and the Geography of Creditworthiness

Racial Inequality in a Recovered Mortgage Market

Research output: Contribution to journalArticle

Abstract

The subprime boom and subsequent foreclosure crisis highlighted risk associated with pursuit of the American Dream of homeownership. People of color and those living in segregated areas were particularly harmed by the dramatic rise and fall of the housing market. Almost a decade after the economy’s collapse, questions remain about racial and spatial disparities in access to mortgage credit. I leverage Home Mortgage Disclosure Act data to explore mortgage application outcomes in 2014. Well into the economy’s recovery, minority borrowers remained at a disadvantage in the mortgage approval process. Whereas 71% of White applicants were approved for home loans, approval rates were lower for Asians (68%), Latinos (63%), and Blacks (54%). Black and Latino borrowers were also significantly more likely to receive higher cost loans than Whites, a practice that has accelerated since the foreclosure crisis. Results suggest that segregation exacerbated racial disparities as lenders funneled expensive credit into isolated minority communities. Furthermore, the differences between White and minority outcomes were largest in census tracts where subprime lending was common in 2006 and foreclosures accumulated during the Great Recession. Together, these findings indicate how spatially organized markets have racialized consequences in a highly segregated society.

Original languageEnglish (US)
Pages (from-to)1-33
Number of pages33
JournalHousing Policy Debate
DOIs
StateAccepted/In press - Jul 30 2017

Fingerprint

foreclosure
segregation
minority
geography
loan
market
credit
racial disparity
homeownership
people of color
housing market
lending
applicant
recession
census
act
costs
cost
community
approval

Keywords

  • mortgage lending
  • Racial inequality
  • segregation

ASJC Scopus subject areas

  • Development
  • Urban Studies
  • Management, Monitoring, Policy and Law

Cite this

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