Sacramento Real Estate Blog

A number of social justice activists and others have pointed out the relationship between race and poverty and predatory lending practices. For example, the Center for Responsible Lending has published a study on Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages, documenting that African-American and Latino borrowers receive sub-prime loans more often than white borrowers, even when their credit history and other lending qualifications may qualify them for a more inexpensive loan.

Unfortunately, the geographical pattern of REO (Real Estate Owned, or “Bank Repo”) sales in the greater Sacramento area tends to support the idea that the link between predatory lending and race may be a very real one indeed. I recently examined the percentage of sales that were foreclosures (REOs) for the period January 1st, 2007 to August 21, 2007. Aside from a few statistical oddities, overall the pattern was pretty clearly one in which the most foreclosures occurred in the poorest neighborhoods.

Of course, just based on such a study, it’s impossible to say how much predatory lending is the culprit, and how much can be attributed to the rather banal idea that living in poverty may make the choice between food and the mortgage more of a common one than it is for rich people.