For Immediate Release

March 6, 2008

Contact: 

Geoffrey Smith – Woodstock Institute – (312) 427-8070
Charles Bromley – Ohio
Fair Lending Coalition – (216) 410-3879
Jim Campen or Tom Callahan – Massachusetts
Affordable Housing Alliance
– (617) 822-9100    
Saara Nafici – Neighborhood Economic Development Advocacy
Project (New York City)
– (212) 680-5100
Adam Rust
Community Reinvestment Association of North
Carolina
– (919) 667-1557
Kevin Stein – California
Reinvestment Coalition – (415) 864-3980
Barbara van Kerkhove – Empire
Justice
Center (Rochester, NY)
(585) 295-581

 

Chicago
Area Minority Communities Continue to Feel the Fallout of Loans from Now Defunct Subprime Lenders

Subprime lenders that ceased operations in 2007 had
saturated minority communities across in the Chicago region and across the country with
high risk loans before going under, according to a report released by a
multi-state collaboration of research, policy, and advocacy organizations.

Most of these lenders had captured large market shares in
minority communities and made few, if any, loans elsewhere. As these
institutions’ loans enter into default and foreclosure, minority and
lower-income communities will certainly bear the brunt of the negative impacts,
such as increased crime and depressed property values.

“The aggressive and deceptive marketing and lending
practices of these failed lenders represented many of the worst excesses of the
subprime market,” says Jim Campen of the Massachusetts Affordable Housing
Alliance. “They are out of business while minority and lower-income communities
suffer the fallout from their toxic loans.”

Minority neighborhoods continue to be devastated by
foreclosures. A recent report released by Woodstock Institute shows that Chicago area communities
that are 80 percent or greater minority have foreclosure rates over four times
greater than predominantly white communities.

The report, Paying More for the American Dream: The Subprime
Shakeout and Its Impact on Lower-Income and Minority Communities, examines the
geographic lending patterns of these defunct subprime lenders in seven
metropolitan areas in the United
States
. These areas include large urban
areas – New York City, Los
Angeles
, Chicago, and Boston, – as well as the smaller urban areas of Cleveland, Charlotte, N.C. and Rochester,
NY
.

The report’s key findings show:

• High-risk lenders accounted for 20 percent of the total
loans in the predominantly minority neighborhoods in these cities compared to 4
percent of all loans in predominantly white neighborhoods in 2006.

• Over 40 percent of loans made by high-risk lenders in
the seven metro areas were in neighborhoods where 80 percent or more of the
residents were people of color. Less than 10 percent of high-risk lender loans
were in areas where less than 10 percent of the residents were people of
color. 

• In some of the markets examined, disparities in the
presence of high-risk lenders in highly minority communities compared to high
white communities were very wide. Comparing these lenders’ presence in
neighborhoods with over 80 percent minority population to neighborhoods with
less than 10 percent minority population shows:

o In Los Angeles, high-risk lenders’ presence was 9.5
times greater in highly minority neighborhoods than in white neighborhoods

o In Cleveland, high-risk lenders’ presence was 4.4 times
greater in highly minority neighborhoods than in white neighborhoods

o In Boston, high-risk lenders’ presence was 4.2 times
greater in highly minority neighborhoods than in white neighborhoods

o In Chicago, high-risk lenders’ presence was 3.7 times
greater in highly minority neighborhoods than in white neighborhoods

• In the seven metro areas as a whole, high-risk lenders
captured almost 20 percent of the market in low-income neighborhoods, while
they had less than 7 percent of the market in upper-income neighborhoods.

“These are the same neighborhoods that are not being
sufficiently served by mainstream financial institutions,” says Saara Nafici of
the Neighborhood Economic Development Advocacy Project in New York City.  “Without access to fair
and responsible mortgage credit, these communities will continue on a cycle of
decline.”

“The Federal government needs to take the lead and
require servicers and investors to modify these abusive loans to affordable
rates,” says Charles Bromley of the Ohio Fair Lending Coalition.  “If
families are not able to stay in their homes, many of these communities may be
lost.”   

Collaboration

The Paying More for the American Dream series is a
collaborative effort of the California Reinvestment Coalition, Community
Reinvestment Association of North Carolina, Empire Justice
Center
, Massachusetts Affordable
Housing Alliance,
Neighborhood Economic Development Advocacy Project (NEDAP), Ohio Fair Lending
Coalition, and Woodstock Institute. This is the second such annual report
focused on examining systematic inequalities in the housing finance system and
the impact of these inequalities on lower-income and minority families and
communities. The previous report, released in March 2007, examined mortgage
pricing disparities found in a group of the country’s largest mortgage lenders
who offered both prime and subprime loans. 

File Icon Paying More for the American Dream – The Subprime Shakeout and Its Impact on Lower-Income and Minority Communities

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