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Okie Boarder
Ladies Man
Joined: 03 Mar 2008
Posts: 10056
City: Edmond
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 Posted: Oct 04, 2010 8:58 am Post subject: More racial profiling? |
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What do you think?
| Quote: | Racial predatory loans fueled U.S. housing crisis: study
On Monday October 4, 2010, 12:17 am EDT
By Nick Carey
CHICAGO (Reuters) - Predatory lending aimed at racially segregated minority neighborhoods led to mass foreclosures that fueled the U.S. housing crisis, according to a new study published in the American Sociological Review.
Predatory lending typically refers to loans that carry unreasonable fees, interest rates and payment requirements.
Poorer minority areas became a focus of these practices in the 1990s with the growth of mortgage-backed securities, which enabled lenders to pool low- and high-risk loans to sell on the secondary market, Professor Douglas Massey of the Woodrow Wilson School of Public and International Affairs at Princeton University and PhD candidate Jacob Rugh, said in their study.
The financial institutions likely to be found in minority areas tended to be predatory -- pawn shops, payday lenders and check cashing services that "charge high fees and usurious rates of interest," they said in the study.
"By definition, segregation creates minority dominant neighborhoods, which, given the legacy of redlining and institutional discrimination, continue to be underserved by mainstream financial institutions," the study says.
Redlining is the practice of denying or increasing the cost of services, such as banking and insurance, to residents in specific areas, often based on race.
The U.S. economy is still struggling with the effects of its longest recession since the 1930s, which was triggered in large part by the housing crisis, which was in part triggered by the crash of the subprime loan market.
Subprime lending refers to loans made to consumers with poor credit and others considered higher risk. They tend to have a higher interest rate than traditional loans.
The study, which used data from the 100 largest U.S. metropolitan areas, found that living in a predominantly African-American area, and to a lesser extent Hispanic area, were "powerful predictors of foreclosures" in the nation.
Even African-Americans with similar credit profiles and down-payment ratios to white borrowers were more likely to receive subprime loans, according to the study.
"As a result, from 1993 to 2000, the share of subprime mortgages going to households in minority neighborhoods rose from 2 to 18 percent," Massey and Rugh said.
They said the U.S. Civil Rights Act should be amended to create mechanisms that would uncover discrimination and penalize those who discriminated against minority borrowers.
The study is published in the October issue of the journal.
(Editing by Paul Simao) |
http://finance.yahoo.com/news/Racial-predatory-loans-fueled-rb-1069330785.html?x=0
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Neognosis
Ladies Man
Joined: 13 Jan 2003
Posts: 17617
City: Webster
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| Posted: Oct 04, 2010 9:05 am Post subject: |
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it's not based on race at all, it is based on economics. The fact is, that in those areas, most of the poor people are of a particular race or group. But the profiling is not race based, it's location and economic level based.
If you live there and you are white and don't have a bank, you don't get a lower rate when you cash your check, do you?
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jryoung
Ladies Man
Joined: 19 Mar 2004
Posts: 7664
City: Man Jose
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| Posted: Oct 04, 2010 9:06 am Post subject: |
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Is it "racial" profiling? Or "poor, uneducated, I can make a buck off this demographic" profiling?
It certainly could be both, but often when race enters the equation socioeconomic status and education don't seem to be direct points in the conversation.
Not really sure what to think as it is a chicken or the egg type argument.
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joebananas
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Joined: 23 Feb 2007
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City: Grand Island, NY
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ScottyB_RochNY
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Joined: 09 Jun 2004
Posts: 971
City: Rochester
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| Posted: Oct 04, 2010 10:46 am Post subject: |
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good marketing and fundamentals of economics.
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Okie Boarder
Ladies Man
Joined: 03 Mar 2008
Posts: 10056
City: Edmond
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| Posted: Oct 04, 2010 11:37 am Post subject: |
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I happen to agree with the comments about the economic side of it. A question that comes to my mind is...
Would these lenders have been able to target this particular group had it not been for the Fair Housing legislation?
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