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Sought or sold? Social embeddedness and consumer decisions in the mortgage market

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  • Carolina Reid

Abstract

This research paper explores how mortgage market channels interacted with localized social networks to shape loan outcomes for historically disadvantaged borrowers. How did borrowers decide on their choice of lender? What loan products were they offered, and how knowledgeable were they about their loan terms? Were loans in lower-income and minority communities ?sold or sought?? To answer these questions, the paper relies on in-depth interviews, local data on mortgage lending and foreclosures, and analysis of the institutions and marketing practices in two communities that represent the two faces of the mortgage crisis in California: an older, predominantly minority neighborhood with an older housing stock (Oakland), and a fast growing suburban area characterized by new construction (Stockton). This research can inform the policy debate around consumer protection regulations and fair lending laws, as well as help local practitioners such as homeownership counselors understand how borrowers access and make decisions about mortgage credit.

Suggested Citation

  • Carolina Reid, 2010. "Sought or sold? Social embeddedness and consumer decisions in the mortgage market," Community Development Working Paper 2010-09, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfcw:2010-09
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    File URL: https://www.frbsf.org/community-development/wp-content/uploads/sites/3/wp2010-09.pdf
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    References listed on IDEAS

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    1. Robert B. Avery & Marsha J. Courchane & Peter Zorn, 2009. "The CRA within a changing financial landscape," Monograph, Federal Reserve Bank of San Francisco, number 2009tcwacf.
    2. Alan Greenspan, 2005. "Consumer finance : a speech at the Federal Reserve System's Fourth Annual Community Affairs Research Conference, Washington, D.C., April 8, 2005," Speech 84, Board of Governors of the Federal Reserve System (U.S.).
    3. Elizabeth Laderman & Carolina Reid, 2009. "CRA lending during the subprime meltdown," Monograph, Federal Reserve Bank of San Francisco, number 2009cldts.
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    Cited by:

    1. Richter, Francisca G.-C. & Craig, Ben R., 2013. "Lending patterns in poor neighborhoods," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 197-206.
    2. Olga Gorbachev & Brendan O'Flaherty & Rajiv Sethi, 2016. "An Ethnic Roller Coaster: Disparate Impacts of the Housing Boom and Bust," Working Papers 16-04, University of Delaware, Department of Economics.
    3. Carolina K. Reid, 2017. "Financialization and the subprime subject: the experiences of homeowners during California’s housing boom," Housing Studies, Taylor & Francis Journals, vol. 32(6), pages 793-815, August.
    4. Kim Kaivanto, 2014. "Visceral emotions, within-community communication, and (ill-judged) endorsement of financial propositions," Working Papers 69123498, Lancaster University Management School, Economics Department.
    5. Danielle Winchester & Sandra Huston, 2013. "Keeping Your Financial Planner to Yourself: Racial and Cultural Differences in Financial Planner Referrals," The Review of Black Political Economy, Springer;National Economic Association, vol. 40(2), pages 165-184, June.

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