Study: Racial Predatory Loans Sparked Housing Crisis

The spate of foreclosures that led to the housing crisis was triggered by predatory lenders targeting poor minority neighborhoods, according to a new study cited by Reuters.

The study published in the American Sociological Review found that racially segregated minority neighborhoods were beset with unreasonable fees and interest rates by lenders beginning in the 1990s.

Because lenders could pool high- and low-risk loans to sell on the secondary market, the study's authors say, minority areas tended to have lenders that "charge high fees and usurious rates of interest" - such as pawn shops and check cashing services.

The study, which analyzed data from the 100 biggest U.S. metro areas, found that African-Americans were more likely to receive subprime loans than white borrowers with similar credit.

"As a result, from 1993 to 2000, the share of subprime mortgages going to households in minority neighborhoods rose from 2 to 18 percent," the authors concluded.

In 2008, a federal lawsuit claimed that black neighborhoods in Baltimore were disproportionately affected by the subprime mortgage fallout.

  • Stephen Smith

    Stephen Smith is a senior editor for CBSNews.com

Comments

CBSN Live

pop-out
Live Video

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.