Racial predatory loans fueled U.S. housing crisis: study
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[Quote](Reuters) - Predatory lending aimed at racially segregated minority neighborhoods led to mass foreclosures that fueled the U.S. housing crisis, according to a new study published in the American Sociological Review.
Predatory lending typically refers to loans that carry unreasonable fees, interest rates and payment requirements.
Poorer minority areas became a focus of these practices in the 1990s with the growth of mortgage-backed securities, which enabled lenders to pool low- and high-risk loans to sell on the secondary market, Professor Douglas Massey of the Woodrow Wilson School of Public and International Affairs at Princeton University and PhD candidate Jacob Rugh, said in their study.
The financial institutions likely to be found in minority areas tended to be predatory -- pawn shops, payday lenders and check cashing services that "charge high fees and usurious rates of interest," they said in the study.
"By definition, segregation creates minority dominant neighborhoods, which, given the legacy of redlining and institutional discrimination, continue to be underserved by mainstream financial institutions," the study says.
Redlining is the practice of denying or increasing the cost of services, such as banking and insurance, to residents in specific areas, often based on race.
The U.S. economy is still struggling with the effects of its longest recession since the 1930s, which was triggered in large part by the housing crisis, which was in part triggered by the crash of the subprime loan market.
Subprime lending refers to loans made to consumers with poor credit and others considered higher risk. They tend to have a higher interest rate than traditional loans.
The study, which used data from the 100 largest U.S. metropolitan areas, found that living in a predominantly African-American area, and to a lesser extent Hispanic area, were "powerful predictors of foreclosures" in the nation.
Even African-Americans with similar credit profiles and down-payment ratios to white borrowers were more likely to receive subprime loans, according to the study.
"As a result, from 1993 to 2000, the share of subprime mortgages going to households in minority neighborhoods rose from 2 to 18 percent," Massey and Rugh said.
They said the U.S. Civil Rights Act should be amended to create mechanisms that would uncover discrimination and penalize those who discriminated against minority borrowers.
The study is published in the October issue of the journal.
[/Quote][URL="http://www.reuters.com/article/idUSTRE6930K520101004"]source[/URL]
Bankers after getting bailouts and bonuses out the ass:
:pcgaming:
nothing new to me
i think it was Boys 'N The Hood that asked why most stores in the ghetto are loan offices, gun shops, and liquor stores
They're a wunch of bankers if you ask me.
Bullshit it was predatory.
These people didn't have a gun to their head demanding they buy a huge house with payments they couldn't afford.
They got bit by the stupid, and are suffering the effects. Unfortunately, so is everyone else.
It's the 1920s all over again.
[QUOTE=Ridge;25252731]Bullshit it was predatory.
These people didn't have a gun to their head demanding they buy a huge house with payments they couldn't afford.
They got bit by the stupid, and are suffering the effects. Unfortunately, so is everyone else.[/QUOTE]
I suggest looking up the definition of predatory, and exploitation while you're at it.
When someone knows you have no one else to turn to except them, then they raise the cost to you, they have preyed on you. They have exploited your weakness for their own profit. Whatever mistake you have made, or not made, does not change that fact. In other words, even if you agree to the exploitation, it is still exploitation.
I agree that people must watch their backs, since it's a dog eat dog world.
But it's ingrained in everyone's head to own their own home, our society has made sure of that. If some banker says he'll give you a loan and you can be in your own home right now, and you've been stuck in an apartment your whole life watching home prices go farther and farther out of your reach- yeah you might be tempted to grab at this last chance. After all, that banker is a professional right? He's not going to be lending money to you if he thinks it's a loan you can't handle. That would be crazy.
The other option is to buy something smaller. I have no problem with renting an apartment. If my family gets bigger, I'll rent a house. It'll be cheaper, and the repairs won't come out of my pocket to get it fixed, as long as it's not my fault.
Not surprising, I remember when this broke: [url]http://consumerist.com/2009/06/affidavits-on-how-wells-fargo-gave-ghetto-loans-to-mud-people.html[/url]
That sucks
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