Do subprime loans create subprime cities? Surging inequality and the rise in predatory lending

Publication Date: February 2008

Publisher: Economic Policy Institute

Author(s): Gregory Squires

Research Area: Banking and finance

Type: Brief

Abstract:

The rise in subprime and predatory lending has put many families and neighborhoods in financial jeopardy as default and foreclosure rates skyrocket, particularly in minority and low-income areas.

Reform of predatory lending practices is a necessary first step, but a comprehensive approach must take into account the connections between the evolution of financial
services and rising inequality, particularly as they affect mortgage lending in the United States.

Ameliorating inequities in the provision of financial services is unlikely without addressing the structural sources of inequality. Public policies and private practices have shaped the uneven development of metropolitan areas, and alternative policies and practices can ameliorate those patterns.