The Clinton Administration teamed up with leftist groups like Obama's colleagues at ACORN to push for more lending to minorities. The Bush Administration stepped up the pace, denouncing down payments as barriers holding minorities back from the American Dream, in part to convert the growing Hispanic population into homeowning Republicans.
This paper analyzes the impact of the subprime crisis on urban neighborhoods in Massachusetts. The topic is explored using a dataset that matches race and income information from HMDA with property‐level, transaction data from Massachusetts registry of deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proven exceptionally unstable in the face of rapid price declines. The evidence from Massachusetts suggests that subprime lending did not, as is commonly believed, lead to a substantial increase in homeownership by minorities, but instead generated turnover in properties owned by minority residents. Furthermore, we argue that the particularly dire foreclosure situation in urban neighborhoods actually makes it somewhat easier for policymakers to provide remedies.
They go on to write:
The first column in each panel of Table 3 shows the cumulative percentage of subprime ownerships that end in foreclosure. There are substantial differences between minority and white ownership vintages. For example, approximately 15 percent of black, subprime ownerships initiated in 2005 ended in foreclosure by December 2007, compared with 10 percent of Hispanic subprime ownerships, and 6.5percent of white subprime ownerships.
|Black||Hispanic||White||Black / White||Hisp / White|
Many people can't believe that minorities could account for so much of mortgage meltdown, but there are now over 100 million minorities in the U.S. Furthermore, their mortgages tended to be relatively larger than one might expect because they tend to live in fairly expensive urban areas rather than in dirt cheap rural areas. In the 2006 vintage, for example, the average Hispanic's mortgage was slightly larger than the average non-Hispanic white's, and the average black's was only about 15-20% less. (The high cost of Hispanics' mortgages is due in large measure to so many living in California, where median home prices were almost triple the other 49 states average at the peak of the Housing Bubble.)
This is not to say that minorities are "to blame" for the Mortgage Meltdown. The bipartisan consensus in favor of raising minority homeownership rates through laxer credit standards deserves much of the blame. As does the financial industry's refusal to ask politically incorrect questions about how many NAMs (Non-Asian Minorities) in California and elsewhere could possibly earn enough money to pay back the huge mortgages being handed out in 2003-2007, or could find Greater Fools willing to pay even more to live in slummy neighborhoods.