Details of HUD Study Findings

“The study found that from 1993 to 1998:- The number of subprime home refinancing loans increased 10 fold to more than 790,000. In 1993, the subprime share of the overall mortgage market represented $20 billion. In five years, this volume multiplied more than seven times to $150 billion.- Subprime loans accounted for 51 percent of home loan refinancings in predominantly African American neighborhoods in 1998, but only 9 percent in white neighborhoods. Comparable 1993 figures were 8 percent in black neighborhoods and 1 percent in white neighborhoods.- The racial disparity is so wide that 39 percent of families in high-income black neighborhoods received subprime home loans in 1998, while less than half that number of families in low-income white neighborhoods received subprime loans.- In low-income neighborhoods, subprime loans accounted for 26 percent of total loans in 1998, compared with only 11 percent in moderate-income neighborhoods and just 7 percent in upper-income neighborhoods. Comparable 1993 figures were 3 percent in low-income neighborhoods and 1 percent each in moderate-income and upper-income neighborhoods.The analysis notes that by providing loans to borrowers who do not meet the credit standards for borrowers in the prime market, subprime lending serves a critical role in the nation’s economy. Subprime borrowers may have blemishes in their credit record, insufficient credit history or non-traditional credit sources. Through the subprime loan market, they can buy a new home, improve their existing home, or refinance their mortgage to increase their cash on hand.The study adds that prime lenders have made significant efforts and progress in reaching historically underserved markets and communities. However, based on the explosive growth of subprime lending in these neighborhoods, the study concludes much remains to be done, in both the primary and secondary markets.”