More Evidence That Predatory Lending Led to Collapse of the Housing Market
Lost in all the chatter about the collapse of the housing market and the “casino economy” promulgated by Wall Street is the role that predatory lending played.
Organizations like the Center for Responsible Lending were sounding the alarm as early as May 2006 — a full 10 months before the subprime market collapsed and more than two years before the rest of the economy was affected — but little was done to address the way that the mortgage lending industry was conducting business.
Now we have new data from the American Sociological Review that says – again! – that predatory lenders were the reason the housing bubble burst:
The study, which used data from the 100 largest U.S. metropolitan areas, found that living in a predominantly African-American area, and to a lesser extent Hispanic area, were “powerful predictors of foreclosures” in the nation.
The researchers felt the problem was so bad they even suggest that the Civil Rights Act be amended to “create mechanisms that would uncover discrimination and penalize those who discriminated against minority borrowers.”
Now, there already is a federal law designed to address this very issue, the Fair Housing Act of 1968. But many fair housing advocates and civil rights organizations have long pushed for further laws like the Housing Fairness Act and policies that could better address housing discrimination and predatory lending.
And of course, the recent financial regulatory reform law includes a provision that will create a federal bureau devoted to protecting consumers from predatory lending that was widely supported by the consumer advocate and civil rights communities. because it would protect vulnerable poor and minority communities that were targeted and then scapegoated.
But its effectiveness will largely depend on how the agency itself is set up and, as we so often find with federal agencies, who is running it.