Subprime Lending and Poor Communities

What are the trends in Massachusetts?

Bread for the World institute recently posted to their blog a study that they conducted showing how widespread subprime lending is in poor communities.

Here's how Massachusetts fared in their study, Homeownership, Subprime Loans and Poverty:

In Massachusetts:

• Foreclosures: 161.14% increase in foreclosures during 2007.

• Subprime Loans: 12.3% of all mortgage loans are subprime.

• Homeownership by income: 90.1% in the top quintile income bracket compared to

30.6% of those in the bottom quintile.

• Homeownership and minorities: 38.7% of minorities are homeowners compared to

68.1% of whites.

• Subprime lending and poverty: 26.6% of all mortgages are subprime in highest

poverty counties.

For the full fact sheet on Massachusetts and a graph on subprime mortgage rates in the highest poverty counties, click here

The study took a look at the whole country and the District of Columbia and, in each case, they found a similar pattern: "The most reliable indicator of where to find high subprime loan rates within any state is where the poverty rates are the highest."

Here's an article from the Chronicle of Philanthropy's blog "Give and Take" on the study. What do you think?

Does this surprise you?

Should it?

How can financial education chip away at these trends and how to we get to the people who need it most?

The ideas in the Chronicle

Submitted by Elizabeth Curtis on Sun, 06/01/2008 - 6:00pm.

The ideas in the Chronicle of Philanthropy's blog do not suprise me. We have to think about the foreclosure crisis as an economic issue - not just a housing issue. It's a symptom of a much larger problem. Some of the disparities in subprime lending can be traced back to racist social and economic policies from years ago that have not been righted. Broadly speaking, though, if we think of a family in crisis and about to lose their home, we must consider what else they are experiencing and how we might help. People will do almost anything to hold on to their homes - cut back on groceries, grow debt, stop paying utility bills.

I heard a story on ABC's World News, www.abc.com, that compared to this time last year, people across the country have spent less on gas. Topically, one might assume this is solely an issue of skyrocketing gas prices. While that definitely doesn't help, my idea is that people aren't going as many places because the entire economy is hurting. People aren't going out to eat at as much, or going shopping, or taking a weekend vacation where they might drive.

All of these indicators, along with the housing crisis, are telling us the economy is in real trouble and real people are feeling it.

Within the Chronicle of

Submitted by Elena Sokolow on Sun, 06/01/2008 - 6:00pm.

Within the Chronicle of Philanthropy's blog entry, there was also a link to another Chronicle article, (http://philanthropy.com/news/updates/index.php?id=4059) that described how the nonprofit sector is struggling to address these issues. As Liz stated above, the foreclosure crisis is not just a housing issue, but a much larger more complex problem that is putting a great deal of pressure on the systems currently in place to meet the needs of families. The author made quite a startling statement at the end of the article, that "almost everybody engaged with the issue of rising foreclosures can agree on one thing: The problem is going to get worse before it gets better." So the question then becomes, what can philanthropy and the government do together to help service providers meet the increasing demand they are now facing, or at least will most likely face in the future?