IDEAS home Printed from
   My bibliography  Save this paper

The untold costs of subprime lending: examining the links among higher-priced lending, foreclosures and race in California


  • Carolina Reid
  • Elizabeth Laderman


This paper explores the relationship between race, subprime lending, and foreclosure in California in an effort to understand what happened during the subprime lending boom. The paper finds that communities of color have been disproportionately affected by the foreclosure crisis, and that these disparities stem from a series of complicated and interrelated factors, including borrower credit profiles, the ‘boom and bust’ housing market, and rising unemployment. However, the paper also shows that Blacks and Hispanics in California had access to very different mortgage markets, and that mortgage market channels played an important role in the likelihood of receiving a higher-priced loan. Once we control for the probability of obtaining a higher-priced loan, the differences in foreclosure rates among minorities and whites shrink considerably. This paper provides compelling evidence for the need to revisit consumer protection regulations and fair lending laws to ensure that minority borrowers aren’t unfairly being steered into different mortgage market channels. ; Paper presented at “Challenges and Opportunities for Homeownership in a Changing Financial Environment,” sponsored by the Federal Reserve Bank of San Francisco in cooperation with The Greenlining Institute, May 6, 2009.

Suggested Citation

  • Carolina Reid & Elizabeth Laderman, 2009. "The untold costs of subprime lending: examining the links among higher-priced lending, foreclosures and race in California," Community Development Investment Center Working Paper 2009-09, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfcw:2009-09

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Mark Doms & Frederick T. Furlong & John Krainer, 2007. "Subprime mortgage delinquency rates," Working Paper Series 2007-33, Federal Reserve Bank of San Francisco.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Preeti Vissa: How Credit Scores Disproportionately Hurt Communities of Color
      by Preeti Vissa in huffington post business on 2010-12-16 02:55:33


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Downing, Janelle, 2016. "The health effects of the foreclosure crisis and unaffordable housing: A systematic review and explanation of evidence," Social Science & Medicine, Elsevier, vol. 162(C), pages 88-96.
    2. Signe-Mary McKernan & Ida Rademacher & Caroline Ratcliffe & Kasey Wiedrich & Megan Gallagher, 2011. "Weathering the storm: How have IDA homebuyers fared in the foreclosure crisis?," Housing Policy Debate, Taylor & Francis Journals, vol. 21(4), pages 605-625, June.

    More about this item


    Mortgage loans ; Mortgage loans - California ; Subprime mortgage ; Foreclosure - California;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfcw:2009-09. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Federal Reserve Bank of San Francisco Research Library). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.