By Dan Rafter

June 2, 2010

Are you one of the more than 23 percent of U.S. homeowners who is underwater on a mortgage loan, according to new figures from If so, who do you blame for it?

Who do you blame for the rapid rise in housing values during the housing boom years, those magical years that came to an all-too-sudden end sometime in mid- to late-2006? And who do you then blame for the steep decline in housing prices that followed?

I’m underwater on my own mortgage loan. I know how natural it is to look for a bad guy. Problem is, when it comes to the residential real estate crash, there really is no one villain.

A lot of people want to blame all those loans that mortgage lenders and banks made to low-income borrowers. But that doesn’t account for the fact that so many housing foreclosures today are of solidly middle- or upper-class homeowners who had solid credit scores and good incomes when they first took out their mortgage loans. A lot of these people have lost their jobs, which makes it hard to make a mortgage payment.

It doesn’t take into account, either, the oddball loan products that banks and lenders developed. Loans in which borrowers didn’t have to present any paperwork to verify their income? Loans that required down payments of zero percent? Interest-only loans? These loan products practically invited high default rates.

So don’t blame only the loans made to poorer borrowers with bad credit histories. Yes, they contributed to the residential real estate fall. But if you look a bit closer, you’ll see that they were only part of the problem. In fact, there’s a good argument to be made that lenders and banks have long victimized these borrowers.

A new study, “Paying More for the American Dream IV,” which was compiled in part by Chicago’s Woodstock Institute, says that mortgage lenders have virtually abandoned neighborhoods that are mostly made up of minorities. The report says that lenders and banks have offered 60.3 percent fewer conventional, or prime loans, in neighborhoods that are largely minority from 2006 through 2008. During the same period, banks and lenders have cut prime lending in neighborhoods that are mostly white only by 28.4 percent.

This means that today’s minority home buyers in cities that are largely segregated, such as Chicago, have great odds of having to take out a high-interest-rate subprime mortgage loan. The American Dream IV study also mentions that banks and lenders mostly ignored minority neighborhoods until the housing boom years.

So again, here’s the big question: Who did the most to cause the housing slump that we’re suffering through now?

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