Economy Ends; Women and Minorities Affected Most

Why are minorities disproportionately affected by foreclosures?  There's a lot of quasi-anecdotal evidence along these lines that indicates they're more likely to currently be in arrears on an unaffordable mortgage.  After decades of worrying about redlining, why are we suddenly worried that too many minorities were buying expensive houses with expensive loans?


The New York Times suggests that the problem is the mortgage brokers; immigrants and African Americans don't trust banks for a variety of reasons.  And they did trust mortgage brokers who were members of their communities, and steered them to expensive loans that earned fat commissions.

I don't say that this isn't the problem--I'm sure it's a least some part of it.  But there's a problem with this sort of analysis.  There are a number of different metrics that go into loan quality, and therefore what a buyer should pay for their loan:

  • Income
  • Expenses, especially outstanding debt
  • Credit score
  • Assets
  • Loan-to-value ratio

Most of the studies I've seen indicating that minorities are steered into pricier loans look at just one, or at most two, of these factors.  But they all matter, particularly the size of the loan.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In