Minority Women and Subprime Lending

By Meg Dunne

The rate of homeownership within a community is more than just a monetary asset. Homeownership also represents a stable, growing community, where residents intend to raise their families and build their lives. “For the African American and Latino communities, women are a key driver in achieving homeownership,” says Patrick Woodall, a senior researcher at the Consumer Federation of America. Data show that African American women make up half of the African American purchase-mortgage borrowers and Latin women make up nearly a third of Latino home purchase borrowers. Ultimately, lending rates charged to minority women have a lasting impact on individual families and their neighborhoods.

Minority women are disproportionately more likely to receive a subprime loan than any other demographic, according to recent research. Due to the rising foreclosure rate in the United States, the subprime home mortgage industry is under higher scrutiny than ever. Aggressive brokers and mortgage companies that continue to support the subprime market are receiving greater attention as more people are unable to pay off their mortgages.

In a December 2006 study published by the Consumer Federation of America, analysts suggest that, regardless of income bracket, women are overwhelmingly more susceptible to predatory lending. Black and Latino women are hit the hardest by the predatory lending industry; they endure the highest mortgage rates regardless of income or credit rating. The study reveals that across all income levels white men are least likely to receive subprime loans, while women of color, whatever their income, are most likely to receive subprime loans.

Upper-income black women are almost five times more likely to receive subprime mortgages than upper-income white men, and Latino women of the same income level are almost four times more likely. Women making more than double their area median income are 50 percent more likely to receive subprime loans than men with similar income. On the larger mortgage borrowing scale, women make up 30 percent of borrowers for all types of mortgages, but they make up 38.8 percent of subprime borrowers. While the monetary consequences of agreeing to an unreasonable subprime loan or going into foreclosure are obvious, there are greater underlying problems concerning homeownership.

Historically, the paying of mortgages is a central means of accruing equity—one that has allowed many working-class families to cross income brackets and establish a strong financial foundation for their families. Subprime lending is proving to be a major barrier to asset building for women of color and thus a critical problem within such women’s communities. Many mortgage brokers label women as “high risk” borrowers, but research is now exposing how this stereotype is actually perpetuated by financial institutions themselves. Unlawful discrimination, prevalence of predatory lending, differences in borrower knowledge, broad pricing discretion by loan officers, and lack of consumer-friendly support systems contribute to the lending disparities that are typically blamed on the consumers.