New NYU Study and Lori Swanson Agree: It’s Time to Get Ourselves Out of the Subprime Mortgage Mess
A new analysis of subprime loans by N.Y.U.’s Furman Center for Real Estate and Urban Policy confirms many of ideas that were discussed at DMI's Marketplace of Ideas event on predatory mortgage lending. The report, which was released this morning, concluded:
"Despite a small decline between 2005 and 2006, New York City’s rate of subprime lending remains much higher than the rest of country and other large cities. Disparities persist in 2006: Black borrowers in New York were four times more likely to receive subprime loans as White borrowers; Hispanic borrowers were three times more likely."
An article in today's Times featured Sarah Ludwig, the executive director of the Neighborhood Economic Development Advocacy Project. Ludwig, who was also on the panel at DMI's Marketplace event, spoke to the racial inequalities of the subprime crisis. “There’s no question that if you live in a predominantly African-American and Latino neighborhood you’re going to be paying more for your mortgage,” she told the Times.
Many of the problems that are documented in the Furman study have been successfully dealt with by Minnesota Attorney General Lori Swanson. Swanson helped to pass some of the toughest predatory mortgage laws in the country, which are now being looked at as a model for national legislation. Swanson spoke at DMI's Marketplace event this past Thursday.
Although the Minnesota legislation does not directly address the racial aspects of predatory lending, it does work to hold lenders accountable for bad loans and deceptive lending practices. Not only do lenders have to verify the borrowers' ability to repay, but they must disclose extra taxes and fees and sudden rate increases. The Minnesota bill also bans pre-payment penalties -- a penalty for paying a loan back early -- and prohibits negative amortization.
As Swanson said at the Marketplace event, "It's not enough just to do no harm to the borrower. A mortgage broker should actually make sure that the loan does some good."
But if you missed the event, you can still watch the video. A video of Swanson's speech is posted here on the DMI website. Swanson says that there are a lot of reasons to care about the mortgage crisis, reasons that reach beyond the racial inequalities mentioned in the Furman study. "A mortgage is the American savings account," she said. "Mortgages and home ownership really is what fueled the American dream in this country. Mortgages are what built the middle class...when that is undermined through the mess that we're in everybody should care."