Fair Housing 2010: A Time to Act
2010 National Fair Housing Policy Conference
New Orleans, LA
July 19-23
Gregory D. Squires
“I love Puerto Ricans and Negroes,
as long as they don’t move next door”
Phil Ochs – Love Me, I’m a Liberal, 1965
Individualistic explanations for high-priced
(subprime) lending
Overreaching homeowners
Lax underwriters
Greedy investors
Asleep-at-the-wheel regulators
Corrupt appraisal and rating agencies
Exploitative mortgage bankers
Text without context is mere pretext – Rev.
Jesse Jackson
Structural context that fed subprime lending
surging inequality
uneven metropolitan development
persistence of racial segregation
Primary Research Question
Is the intensity of racial segregation at the
metropolitan level related to the proportion of
high-cost loans?
Analysis draws from, Gregory D. Squires, Derek S. Hyra, and Robert N. Renner, “Segregation and the Subprime
Lending Crisis,” paper presented at the 2009 Federal Reserve System Community Affairs Research Conference, April 16,
2009, Washington D.C
Why Segregation Might Matter
 Isolation can lead to inexperience
 Prime lenders may avoid perceived “high risk” areas
creating market opportunity for high-cost lenders
 There may be higher risk in segregated communities
 Segregation might facilitate identification of lowincome, minority markets
High Priced Loans by Borrower and Tract
Income – U.S. and Milwaukee, 2006
70
60
50
40
Low
Moderate
Middle
Upper
30
20
10
0
Borrower
US
Tract US
Borrower
Mil
Tract Mil
Race and High Priced Loans
U.S. and Milwaukee, 2006
70
60
50
40
30
20
10
0
AA US
Hisp US White US
AA Mil
Hisp Mil White Mil
Racial Composition of Neighborhood and High Priced Loans
U.S. and Milwaukee, 2006
70
60
50
Less than 10%
nonwhite
80-100% non-white
40
30
20
10
0
White US
NW US
White Mil
NW Mil
5 Most and Least Segregated Metro Regions
and % of High-Cost Loans
Black Seg Index % High Cost
Most Segregated Regions
Detroit, MI
Milwaukee, WI
Chicago, IL
Cleveland, OH
Flint, MI
Average
Least Segregated Regions
Coeur d:Alene, ID
Hinesville-Ft. Stewart, GA
Santa Fe, NM
Prescott, AZ
Bellingham, WA
Average
84
81
78
77
76
79
34
29
31
28
37
32
16
18
21
21
22
20
24
39
17
21
16
23
Variables Tested
• Percent of High-Cost
Loans (Dependent)
• Median Value for Owner-
Occupied Units
• Percent in Poverty
• Percent Low Credit Score
• Percent Unemployed
• Percent with BA or higher
• Percent Minority
• Branch bank per 1,000 pop.
• Black Segregation
• % mortgage loans by
• Hispanic Segregation
independent mortgage
companies
Predictors of Proportion of High- Cost
Loans (Regression Models)
Significant (p<.05)
Education
Low Credit Score
Percent Minority
Black Segregation
Hispanic Segregation (-)
Median Home Value (-)
% mortgages by independent
mortage companies
Conclusions
 The concentration of minorities is associated with the
proportion of high-cost loans
 The association of black segregation with high-cost loans is
stronger than Hispanic segregation
 Higher education and higher credit scores are important
protective factors against high-cost loans
Limitations and Next Steps
 Data Limitations
 Lacking Direct Mechanism(s)
 targeting high-priced products?
 lack of opportunity for prime products?
 less informed borrowers?
 Within City Analysis
Some Next Steps
 Failure of self-regulating markets
 Need for strong, independent regulatory authority
 Recognize explicitly racial dimensions of crisis
 Effectively challenge prerogatives of private capital
 Nurture advocacy and reform from the bottom up
Reducing Metropolitan-Level Segregation
Housing Fairness Act of 2009 – HR 476
nationwide fair housing testing
increase FHIP funding
LIHTC – target to low-poverty areas
Inclusionary Zoning
Affirmatively furthering fair housing
CDBG
TARP
Future federal investments in financial
institutions – e.g. loans to AIG,
access to Fed’s discount window etc.
Assuring Fair Access to Financial Services
CRA Modernization Act of 2009 – H.R. 1749
apply CRA to non-depositories
require service to minority as well as low- income
communities
cover all areas served, not just those with a branch office
expand pricing information to all loans
mandate HMDA-like data for insurers
Consumer Financial Protection Bureau
Prohibiting Predatory Lending
Mortgage Reform and Anti-Predatory Lending
Act of 2009 – H.R. 1728
Duty of care – present appropriate loan
products that borrower can repay and
provide net tangible benefit
Limits steering and compensation via YSP
Assignee liability – mortgage securitizers can be
required to compensate borrowers for costs of
inappropriate loans
No limits on state laws
Too Big to Fail?
 Break up institutions that pose “systemic risk”
 Reinstate Glass Steagall
 Separate investment from commercial banking
 Utilize traditional restructuring tools for failing
institutions
Organizing and Advocacy
Support and work with NCRC, NFHA, CRL, CCC, LCCG
(Leadership Center for the Common Good) and other
advocacy groups
Engage churches, labor unions, editorial boards, and
other institutional actors
Communicate with elected officials, regulators,
corporate executives
Lawrence B. Lindsay
“There are two faces of community development: noisy
protest and quiet accomplishment…One can act one way at age
20 another at age 40. It is called growing up…The protest
banner can still be held reverently in our box of momentos,
along with the love beads and peace signs.”
Frederick Douglass
“If there is no struggle, there is no progress.
Those who profess to favor freedom and yet deprecate agitation
Are men who want crops without plowing the ground. They
want rain without thunder and lightening They want the
ocean without the awful roar of its waters
Power concedes nothing without a demand
It never did, and it never will