Black homebuyers – even those with high incomes, are more often denied mortgages than white homebuyers in the Twin Cities, according to a new report by the University of Minnesota Law School.
The report shows blacks and Hispanics are also more likely to get subprime loans with higher interest rates, regardless of income.
This is true even as the housing market continues to recover, as MPR News reports.
Report authors are calling on Twin Cities lenders to change their practices to ensure fairness for qualified homebuyers.
The new findings offer a grim update to a 2009 study by the U of M that found so-called toxic subprime loans with adjustable rates were highly targeted towards Twin Cities communities of color.
The risky loans contributed to the foreclosure crisis and staggering drops in housing values that also disproportionately affected people of color, says Myron Orfield, who authored the report.
"High-cost loans and poor access to prime finance exacerbated the housing crisis in these areas,” says Orfield, Director of the Institute on Metropolitan Opportunity at the U.
Orfield’s report found Census tracts with more than 30 percent people of color in the Twin Cities were more affected by subprime lending:
Researchers say that between 2004 and 2006, exactly half the mortgage loans received by black homeowners in the Twin Cities were subprime.
For Hispanics, 37 percent were subprime. For Asians, that number was 20 percent.
By comparison, the report found, just 10 percent of mortgage loans borrowed by whites were subprime.
Subprime mortgages played a key role in the housing crisis and the financial meltdown
As homeowners fell behind on monthly loan payments for mortgages they couldn’t afford, houses across the country, and in Minnesota, fell into foreclosure.
This was particularly true in areas where subprime lending was concentrated, such as North Minneapolis and East St. Paul.
These metro neighborhoods saw tremendous numbers of foreclosures and vacant homes.
Thousands of families were displaced as a result, MPR News reports.
While subprime lending is less common today, University of Minnesota researchers found credit remains more difficult to access for equally-qualified people of color than for whites.