Race-based subprime mortgages?

Nearly half of blacks who bought a house in 2005 or 2006 ended up with a high-interest mortgage, compared with 13 percent of white home buyers, according to an Atlanta Journal-Constitution analysis of federal mortgage data.

The disparity was striking, even in a comparison of home buyers with similar incomes. Among black home buyers making more than $100,000 a year, 41 percent got a subprime mortgage, compared with 7 percent of whites in the same income category.

Can’t imagine why that many (or any) would choose an expensive subprime over a lower rate regular mortgage. So the inescapable conclusion is blacks were only offered subprimes while whites got better rates and cheaper mortgages.


  1. I have no doubt that structural inequality still exists. Yet I wonder if there aren’t other factors in play as well. For example, the article notes:

    “A national study of credit scores of all consumers, not just mortgage loan applicants, found that 52 percent of blacks have credit scores that would classify them as subprime borrowers, compared with 16 percent of whites.”

    This corelates almost perfectly with the Atlanta numbers reported in the article– yet, as the article notes, it doesn;t explain why borrowers with good scores went sub-prime.

    Another possibility: people who want more house than they can afford, regardless of income, are more likely to require a sub-prime mortgage. The tendency to buy more house than one can afford is (I would argue) at least partly cultural: far more likely in CA than in NH or IA for example. (This likely relates to the percentage of luxury automobiles in these states. CA values visible extravagance far more than the northeastern states.)

    Is it possible that, for cultural reasons, middle class blacks could be statistically more likely to choose to stretch for more house than middle class whites? An African-American friend of mine once noted that those who begin life with little (or whose parents did) often want to flaunt what they’ve got– not realizing that “stuff” isn’t the source of happiness. She asked, “How would we KNOW that if we’ve never had money before?”

  2. Could be. Or it could be blacks simply weren’t offered anything but subprime mortgages.

    If they bought bigger houses because they’d always been poor, then whites would have done the same too. But the data doesn’t seem to support that.

  3. I think the question you raise is, what percentage of middle class blacks come from poor families as compared with the percentage of middle class whites who come from poor families. Considering a few decades ago there was very little black middle class (while over the same period the white middle class has been shrinking instead of growing), it seems likely there is a higher percentage of black newcomers to relative wealth than there are white newcomers.

    It may be that blacks were offered only sub-prime mortgages– but if that’s the case, it’s a huge violation of Federal law. Is it possible that there was an industry-wide conspiracy over a significant period of time to discriminate against people of color in violation of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA)? Sure. But could such a conspiracy exist with no one jumping up and down about it? Much less likely. Someone would be screaming for blood– and arrests would be made.

Comments are closed.