On the one side of the subprime regulation debate, you have an industry that says these loans provide homeownership opportunities to people who wouldn’t otherwise qualify for a loan.
On the other side are advocates who are watching foreclosure rates climb, homeowners losing homes, credit and hope, and communities boarding up.
In the middle, at an alarming proportion, are low-income and minority families, the ones too often blamed for their own "misfortune."
In fact, there are many factors at play in this exploitation of the American Dream: Conventional banks that deal in prime mortgages have left low-income minority neighborhoods in favor of more lucrative communities. In their absence, alternative lenders have filled the void. And the mortgage market is no longer an agreement between a lender and a borrower. Loans are chopped up into financial investments with high yields for some and high-interest for others, complete with an incentive system to lenders who sell high-interest loans that, even if they end in foreclosure, return a profit to investors.
A study by the Oregon Center for Public Policy found that in 2006, about half of all middle-income black and Hispanic borrowers in Oregon received subprime loans. That’s compared with only 25 percent of white borrowers making the same amount of money. Credit ratings, which the study does not analyze, could be a factor in these outcomes, but the disparity appeared at all income levels, and the figures echo similar findings in studies across the country: Subprime loans are concentrated in lower-income neighborhoods, among minorities, even though it is estimated that between 30 percent and 50 percent of those receiving subprime loans would qualify for prime rate mortgages.
The industry’s claim of the mortgage of last resort rings false.
Call it discrimination, economic segregation, or more ugly terms, what we have is an entire money-making scheme that keeps poor people paying more, undercuts homeownership and erodes the social and economic structure of minority neighborhoods. It is a set-up ripe for predatory lenders that perpetuate and aggravate the cycle of debt, poverty and homelessness.
Meanwhile, the federal government continues its punishing crusade to cut off assistance -— in health care, emergency food programs and employment services — to the very people victimized by its policies. President Bush’s 2009 budget would cut more than $200 million in federal assistance to Oregon, including cuts to energy assistance, adult education and worker training programs, and Head Start. The symptoms get the headlines, but these are the real policies of poverty.
It is time for state and local governments to say not in our communities, not to our people. If the larger policies at work are not in our best interest, lawmakers in Salem have to make up the difference. It is imperative that legislators push through not only the remedial subprime reform House Bill 3603, but follow through next session with the larger protections offered in the more comprehensive Senate Bill 1090, which now languishes in committee.
More importantly, however, the larger policies of poverty must be called out, and the perpetuation of economic discrimination taken as a nationwide responsibility. We have to stop punishing the victims, and hold the oppressors accountable.