Alexander Gourse

August 2007


Geoff Smith, Woodstock Institute research director discussese recent Woodstock research on disparities in the subprime market and possible state and federal solutions.


From the article: 


“Subprime lenders,” says Smith, “are taking advantage of the fact
that they’re the only game in town.” Individual brokers and loan
officers make money by taking “points”—that is, charging percentage
points of the loan amount, which are added to the borrower’s closing
costs—giving them an incentive to maximize the loan amount, regardless
of the borrower’s ability to pay for it.


According to “Paying More for the American Dream,” a joint report
from six national housing policy organizations, in 2005, black
borrowers were 3.8 times more likely than whites to be placed in a high
cost loan, while Hispanic borrowers were 3.6 times more likely than
whites to receive such a loan. Income disparities between white and
minority communities account for some of this difference, but Smith
says the disparity is too large to be accounted for by income alone.
Low-income black borrowers in the Chicago area were four times as
likely to be put in high cost loans than low-income white borrowers.


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