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1.4.2 Borrower Characteristics in the Subprime Market

Certain borrower characteristics are more prevalent in the subprime than in the prime market. For example, data submitted under the Home Mortgage Data Act revealed that African-American and Latino borrowers in 2005 were much more likely to take out higher-rate loans than non-Latino white borrowers. For purchase-money loans, 54.7% of African-Americans, 46.1% of Latino whites, and only 17.2% of non-Latino whites received higher-priced loans. The gaps were slightly narrower for higher-priced refinance loans, which comprised 49.3% of African-American, 33.8% of Latino white, and 21.0% of non-Latino white borrowers.67

Disparities remain even for borrowers with the same income. Controlling for the borrower-related factors available in the HMDA data (i.e., property location, income relied on for underwriting, loan amount, time of year the loan was made, and presence of a co-applicant)68 accounted for only some of the difference in the incidence of higher-cost loans among racial and ethnic groups. For example, for conventional home-purchase loans, borrower-related factors in the HMDA data accounted for about one-fifth of the difference between blacks and non-Latino whites, bringing the percentage of higher-rate loans down to 47% for blacks (compared to 17.2% for whites).69 Other studies have also found that African American and Latinos are disproportionately represented in the subprime market, even at upper-income levels.70

High concentrations of subprime lending and racial disparities in subprime lending has existed in all regions throughout the United States and in metropolitan areas of all sizes.71

The consistency of this data from study to study raises the very real question as to whether discrimination and steering account more for placement in the subprime market (and, hence, higher prices) than risk.72

Other disparities also exist in the subprime market. Females appear to be more likely to receive subprime mortgages, even when controlling for income, although the studies are not completely consistent.73 Older borrowers are also overrepresented in the subprime market.74 Another study found significant subprime refinance variation between regions. Borrowers on the West Coast and Northwest were half as likely to receive subprime refinance loans as borrowers in the Southwest or Great Plains, and there were also large variations among Metropolitan Statistical Areas, with the highest subprime MSAs concentrated in the Southeast, Southwest and Midwest regions.75


  • 67 {67} Robert B. Avery, Kenneth P. Brevoort, Glenn B. Canner, Higher-Priced Home Lending and the 2005 HMDA Data, Fed. Reserve Bulletin-2006 A123 (Sept. 8, 2006), available at

  • 68 {68} Even if these factors are not directly used in loan underwriting or pricing, they are proxies for at least some of the factors that are considered. Id.

  • 69 {69} Id. Another study that combined the HMDA data with underwriting information from a large, proprietary subprime loan dataset found that African Americans and Latinos are commonly almost a third more likely to get a high-priced loan than white borrowers with the same credit scores. See Debbie Gruenstein Bocian, Keith S. Ernst, Wei Li, Center for Responsible Lending, Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages (May 31, 2006), available at

  • 70 {70} Rakesh Kochar, Ana Gonzalez-Barrera, Daniel Dockterman, Pew Hispanic Center, Through Boom and Bust: Minorities, Immigrants, and Homeownership, Pew Hispanic Center (May 12, 2009), available at (finding that in 2007 Latinos were 2.7 times, and African Americans 3.3 times, as likely as whites to receive a subprime home purchase loan); Paul S. Calem, Jonathan E. Hershaff & Susan M. Wachter, Neighborhood Patterns of Subprime Lending: Evidence from Disparate Cities, 15 Housing Pol’y Debate 603 (2004) (minority status is significantly related to subprime borrowing in seven cities); Robert B. Avery, Kenneth P. Brevoort, & Glenn B. Canner, The 2007 HMDA Data, Fed. Reserve Bull. A107, A141 (2008), available at (after accounting for borrower characteristics, African Americans are more than twice as likely as whites to have a high-cost loan; Hispanics are 43% more likely to have a high-cost loan); U.S. Dep’t of Housing and Urban Development, Unequal Burden: Income and Racial Disparities in Subprime Lending in America (2000) (finding, from studies conducted in Atlanta, Baltimore, Chicago, Los Angeles, and New York, that: (1) from 1993–1998, the number of subprime refinancing loans increased ten-fold; (2) subprime loans are more than three times likely in low-income neighborhoods than in high-income neighborhoods; (3) subprime loans are five time more likely in black neighborhoods than in white neighborhoods; (4) homeowners in high-income black areas are twice as likely as homeowners in low-income white areas to have subprime loans); Robert B. Avery, Glenn B. Canner, and Robert E. Cook, Federal Reserve Board, New Information Reported Under HMDA and Its Application in Fair Lending Enforcement (Summer 2005), available at (reporting on preliminary analysis of HMDA data); Paul Calem, Kevin Gillen, & Susan Wachter, The Neighborhood Distribution of Subprime Mortgage Lending 14 (Univ. of Penn., Wharton Sch., Zell/Lurie Real Estate Ctr., Working Paper 404, 2002) (finding a “statistically significant relationship such that African-American borrowers, regardless of the neighborhood where they are located, have relatively high likelihood of obtaining a subprime loan compared to a prime loan”); Ira Goldstein, Reinvestment Fund, Predatory Lending: An Approach to Identify and Understand Predatory Lending (2002) (showing that areas within the City of Philadelphia with a higher potential vulnerability to predatory lending tended to have greater concentrations of foreclosure sales; areas that are predominately African American and/or Latino also tended to have higher concentrations of foreclosure sales and were more vulnerable to predatory lending); Debbie Gruenstein and Christopher E. Herbert, ABT Assoc., Inc., Analyzing Trends in Subprime Organizations and Foreclosures: A Case Study of the Boston Metro Area, at i (2000) (showing that the growth of subprime lending in the Boston Metro area was much more significant for properties in low-income and minority neighborhoods than for properties in other neighborhoods; the concentration of subprime lending in minority and low-income neighborhoods was especially striking in the refinance market); Daniel Immergluck and Marti Wiles, Woodstock Institute, Two Steps Back: The Dual Mortgage Market, Predatory Lending, and the Undoing of Community Development (2004) (showing that mortgage refinancing by subprime lenders occurred predominately in African-American neighborhoods in Chicago; refinance lending by subprime lenders in African-American neighborhoods grew by almost thirty times during the period 1993–1998, much faster than in white neighborhoods (only 2.5 times)); Ken Zimmerman, Elvin Wyly, and Hilary Botein, Institute for Social Justice, Predatory Lending in New Jersey: The Rising Threat to Low-Income Homeowners 5–6 (2002) (finding that New Jersey African Americans are 2.5 times more likely than whites to be provided subprime loans).

  • 71 {71} See, e.g., Calvin Bradford, Center for Community Change, Risk or Race? Racial Disparities and the Subprime Refinance Market 6–7 (Washington, D.C. 2002); Paying More for the American Dream: A Multi-State Analysis of Higher Cost Home Purchase Lending (Mar. 2007), available at (a joint report by California Reinvestment Coalition, Community Reinvestment Association of North Carolina, Empire Justice Center, Massachusetts Affordable Housing Alliance, Neighborhood Economic Development Advocacy Project, Woodstock Institute); National Community Reinvestment Coalition, Fair Lending Helps Community Prosperity: An Analysis of Fair lending Disparities in the New Orleans Metro Area (Apr. 2007), available at; Kevin Stein, California Reinvestment Coalition, Who Really Gets Higher-Cost Home Loans? Home Loan Disparities By Income, Race and Ethnicity of Borrowers and Neighborhoods in 14 California Communities in 2005 (Dec. 2006), available at

  • 72 {72} National Consumer Law Center, Mortgage Lending § 7.2 (2d ed. 2014), updated at

  • 73 {73} The Federal Reserve Board analysis of the 2005 HMDA data found little difference in pricing or credit denials when borrowers in the 2005 data were distinguished by gender. Robert B. Avery, Kenneth P. Brevoort, Glenn B. Canner, Federal Reserve, Higher-Priced Home Lending and the 2006 HMDA Data, Fed. Reserve Bulletin-2006 A123 (Sept. 8, 2006), available at

    In contrast, a Consumer Federation of America study based on the 2005 HMDA data found that, controlling for income, women are more likely than men to receive higher-cost mortgages. Allen J. Fishbein, Patrick Woodall, Consumer Federation of America, Women Are Prime Targets for Subprime Lending: Women Are Disproportionately Represented in High-Cost Mortgage Market (Dec. 2006), available at

    Unlike the Board’s analysis, the CFA study looked not only at loans with a single female borrower, but also at those with a male co-applicant when the female was listed as the primary borrower. Most likely, when the female was listed first, the female’s income was higher than that of the male co-applicant and was the primary support for the loan. Another study found that female borrowers accounted for 29% of subprime refinance mortgages compared to 19% of all refinance mortgages. See National Community Reinvestment Coalition, The 2005 Fair Lending Disparities: Stubborn and Persistent II (May 2006), available at (data on gender bias and racial/ethnic and socioeconomic disparities in provision of high-rate subprime loans).

  • 74 {74} See Howard Lax, Michael Manti, Paul Raca, & Peter Zorn, Subprime Lending: An Investigation of Economic Efficiency, Housing Policy Debate 15:3, at 545 (2004) (30% of borrowers getting subprime loans are aged 55 and older as compared with 17% of prime borrowers in this age category).

  • 75 {75} See Allen J. Fishbein, Patrick Woodall, Consumer Federation of America, Subprime Locations: Patterns of Geographic Disparity in Subprime Lending (Sept. 5, 2006), available at

    The study also found that African-American and Latino borrowers were more Likely to receive subprime loans.