Official websites use. Share sensitive information only on official, secure websites. In the decade leading up to the U. We analyze qualitative data from actors in the lending industry to identify the social structure though which this mortgage discrimination took place.
Our data consist of depositions, declarations, and related exhibits submitted by borrowers, loan originators, investment banks, and others in fair lending cases. Our analyses reveal specific mechanisms through which loan originators identified and gained the trust of black and Latino borrowers in order to place them into higher-cost, higher-risk loans than similarly situated white borrowers.
Racial disparities in wealth are currently at their widest levels in decades. These gaps in wealth by race are less a product of income disparities than of differential access to good homes in high quality neighborhoods, which in turn produces racial differences in homeownership rates, home values, and the accumulation of home equity, the principal source of wealth for most American families Oliver and Shapiro, Historically, these disparities have been driven by multiple forms of discrimination, both public and private, including white mob violence against African-Americans trying to move into formerly all-white neighborhoods, municipal segregation ordinances prohibiting residence by blacks on predominantly white blocks, racially restrictive covenants barring the future sale of a property to non-whites.
One of the many forms of neighborhood-based racial discrimination that contributed to current disparities is the legacy of redlining—the denial of credit to non-white residential areas Rothstein More recently, the rise of new lending practices that specifically target nonwhite neighborhoods for risky, high cost financial services have further widened racial disparities in home equity and wealth Hyra et al.
Numerous quantitative studies have found that black and Latino borrowers over the past decade were frequently charged more for mortgage loans than similarly situated white borrowers e. Even after controlling for credit scores, loan to value ratios, the existence of subordinate liens, and housing and debt expenses relative to individual income, Bayer, Ferreira, and Ross found that black and Latino borrowers in all of the seven metropolitan areas they studied were significantly more likely to receive a high-cost loan than others.
