Sub Prime Lenders Target Minority Neighborhood

Information compiled from the year 2000 Home Mortgage Disclosure Act data shows that Ohio Metropolitan Statistical Areas rank very high in aggressive marketing of sub prime refinancing loans in both African-American neighborhoods and concentrated minority neighborhoods versus white neighborhoods.

 Application number for sub prime refinancing loans in African-American neighborhoods for the year 2000 show that Ohio MSAs represented 5 of the top ten MSAs in the entire country, and 9 of the top 50 (or 18% of the top 50 MSAs in the country). The same data for sub prime refinancing loan applications in concentrated minority neighborhoods for the year 2000 show that Ohio represents four of the top ten MSAs in the entire country, and six of the top 20 (or 33% of the top MSAs in the country).

Residents in Ohio minority and African-American neighborhoods are twice as likely to receive a sub prime loan than residents in white neighborhoods. This information further supports the contention that the lack of prime lenders in these neighborhoods has led to the explosion of sub prime lending in these same neighborhoods. "The unfortunate truth is, many of these borrowers could possibly qualify for prime loans but prime lenders have left these neighborhoods subject to the heavy marketing tactics conducted by sub prime lenders," said Chip Bromley director of Metro Strategy Group. Both Fannie Mae and Freddie Mac have confirmed that anywhere from 10% to 50% of sub prime borrowers could qualify for a prime loan.

The exponential growth of the sub prime market is not due to impaired credit but to a new form of red-lining. This is further reinforcement of recent research by such groups as Center for Community Change, ACORN, and the Department of Housing and Urban Development showing that sub prime products are over-marketed to minority communities.

This new data only confirms and supports previous research done on sub prime lending in Ohio. Statewide, sub prime lending is having dramatic and dangerous impact on minority and African-American neighborhoods. "The State of Ohio needs to devote its attention to this issue immediately. This is a serious civil rights issue to be addressed by a full scale investigation by the Ohio Civil Rights Commission," said Bromley.

Published in the Homeless Grapevine, Cleveland Ohio July 2002 Issue 55