First-time Homeowners Benefited Least from Subprime Loans
If the subprime market flourished because of pressures to help first-time minority homeowners, it would stand to reason that those first-time homeowners would have been the recipients of the most subprime loans. Wrong again. Between 1998 and 2006, only 9% of subprime loans went to first-time homeowners, according to the Center for Responsible Lending. The majority of subprime loans—62% were issued to homeowners looking to refinance an existing home.
White Americans Overwhelmingly Took out the Most Subprime Loans
While African Americans were more likely to be steered into subprime mortgages than white Americans, whites took out 56% of all subprime loans, far more than the 19% taken out by African Americans. The proportion was 21% for Hispanics. Money also increased the likelihood of a borrower taking out a subprime loan, but not in the way that conservatives claim. Most subprime loans went to high-income borrowers, according to data compiled as part of the 2006 Home Mortgage Disclosure Act. In fact, across all racial groups, as income decreased, the number of subprime loans decreased.
With so much evidence to the contrary, it’s hard to see how minorities and low-income borrowers could be the culprits behind the credit crisis. “It’s easy to blame the victim,” says Marc H. Morial, president and CEO of the National Urban League. “It becomes a perverted justification to discriminate. It’s specious, it’s hateful, and we are going to fight back against this misinformation.” The false allegations could have dangerous repercussions. “If we allow scapegoating to take place,” says Morial, “people will suggest fixing the problem by not lending to African Americans.”
This story originally appeared in the January 2009 issue of Black Enterprise magazine.