Subprime Mortgages and Race: A Bit of Good News May Be Illusory

Washington Post (06/30/08) P. A2; Vedantam, Shankar
Subprime loans have enabled more households with low income and poor credit to become homeowners, but they have also increased racial segregation in the United States, according to new research. George Washington University sociologist Gregory Squires says that when credit rating and income are controlled, segregation can also be seen as a factor; and an analysis of lending in New York City by the Furman Center for Real Estate and Urban Policy shows that about 40 percent of subprime loans issued between 2004 and 2006 were made to blacks, followed by a third to Hispanics and about 10 percent each to whites and Asians. Meanwhile, researchers Carolyn Bond and Richard Williams have conducted a national analysis showing that subprime loans have increased homeownership, especially in predominantly minority neighborhoods, but also have increased the risk of a default, foreclosure and decline in value of entire neighborhoods, reducing their appeal to people from other social classes and racial groups. Moreover, subprime loans may have set off the current economic crisis.