Sen. Warren: Subprime mortgage crisis targeted minority families

by MPA10 Dec 2014
During a meeting with her Boston donors over the weekend, U.S. Sen. Elizabeth Warren (D-Mass.) heavily lambasted the federal government’s approach to the subprime mortgage crisis in 2008.

Warren told donors that Hispanic and African-American families were “targeted” during the mortgage crisis, according to Politico. Attendees told the media outlet she also criticized President Barack Obama’s Treasury Department pick Antonio Weiss and the growing race relations problem in the United States.

African-American borrowers increased from 6% in 2001 to 8% in 2005 during the housing bubble; by 2013, their share dropped to 4.8%. Hispanic borrowers followed similar pattern: increasing from 9% in 2001 to 13% in 2005, before dropping to 7.3% in 2013.

The Urban Institute reported that the current tight credit environment has constrained mortgage lending and is disproportionately affecting African-American and Hispanic households, who tend to have less savings and lower credit scores than whites. 

 African-Americans experienced a denial rate of 29% for conventional home purchase lending compared to a denial rate of 11% for whites. Meanwhile, upper-income African-Americans and Hispanics were 2.3 times and 1.8 times more likely than whites to be denied conventional mortgage loans, respectively, according to the National Community Reinvestment Coalition.

The results of the Department of Housing and Urban Development (HUD) investigation during the mortgage crisis in the Atlanta area gave some support to the notion of lower-income minority families being “targeted.”

“In general, the analysis shows that subprime lending is more prevalent in lower-income and minority neighborhoods than in higher-income and white neighborhoods,” the HUD study reported.  “This likely indicates that because of their lower incomes, lenders may consider these borrowers to be a higher credit risk, and these borrowers may therefore be less likely to qualify for prime loans.”
“However, a lack of competition from prime lenders in these markets to find creditworthy borrowers may increase the chances that borrowers are exposed to the predatory practices of a subset of subprime lenders,” the report continued. “There is also evidence suggesting that after controlling for income, predominantly black neighborhoods may be comparatively underserved by prime lenders.”

The alleged “targeting” of minority applicants who received low-interest loans in order to increase access to housing was by no mistake, according to Rather, it was a part of the 1977 Community Reinvestment Act (CRA).

“In the 1990′s under the administration of Franklin Raines, a Clinton Administration appointee, Fannie Mae began to demand that the lending institutions that it dealt with prove that they were not redlining,” according to an analysis from San Jose University economics professor Thayer Watkins. “This meant that the lending institutions would have to fulfill a quota of minority mortgage lending.”


  • by KC | 12/10/2014 9:44:54 AM

    This is a mind boggling article. The headline makes it as if minorities were taken advantage of during the housing bubble, instead of the obvious truth that lending standards were loosened to allow more people to qualify to purchase a home. Then the article states that minority borrowers are now being discriminated against because current lending standards are too tight?

  • by DW | 12/10/2014 10:15:59 AM

    Taken at face value one might think targeting occurred. However as you review the data on a more granular level it is clear that these mortgages went to people of all races based on their credit profile. Lower scores are traditionally due to a mismanagement of credit. Why should someone who doesn't pay their bills be able to get the same rate as the individual who pays as required? isn't that called accountability? It is a privilege not a right to own a home...somehow that has been forgotten. A perfect analogy is car insurance. The driver who has no tickets or accidents will pay a lower rate than the driver who has multiple violations and accidents. It is all about risk management. That is why HMDA data when reviewed on the surface is misleading and people who lean a little more to the left take advantage of it and sensationalize it for personal gain.

  • by Nick | 12/10/2014 10:53:30 AM

    There is some truth to what Sen. Warren is claiming. But the fact of the matter is that it was the minorities took advantage of each other, for the most part. As a wholesale AE in the Los Angeles area leading up to the market crash I saw it happen. Many of my brokers would take advantage of people of their own race or ethnicity--meaning the broker offices that were operated by people of Mexican decent took advantage of Mexican clients. The same was true of black brokers and Asian brokers. People too often put more trust in the people of their own race or ethnicity, and the minority broker knew that and took advantage of it.


Should CFPB have more supervision over credit agencies?