A Critical Look at the Subprime Housing Crisis Leads to Best Article Award
Abt Associates Recognized for Award Winning Article on Mortgage Default among Racial, Ethnic Groups
The 2007 subprime mortgage crisis triggered severe consequences for families and businesses across the country. New insight from Abt Associates and partners offers a deeper understanding of the nature of the crisis and which Americans were disproportionately affected.
In the article, “Revisiting the Subprime Crisis: The Dual Mortgage Market and Mortgage Defaults by Race and Ethnicity,” Abt’s Debbie Bocian and colleagues Carolina K. Reid, Wei Li, and Roberto G. Quercia, went beyond the headlines to examine the underwriting process before the crash. They analyzed national data sets on loan origination and terms, the race and ethnicity of borrowers, and complete underwriting criteria for more than 900,000 loans before the crisis. The analysis led to disturbing findings, including, “Black and Hispanic borrowers were systematically offered different loan products, with material consequences.”
“Our analysis shows that borrowers of color were more likely to be placed into loan products with risky features than similarly-situated non-Hispanic White borrowers,” said Bocian. “Too often, people want to dismiss racial and ethnic disparities in lending as being the result of differences in legitimate risk-based underwriting; this research will hopefully help dispel that.”
The study’s authors also determined that the types of loans that Black and Hispanic borrowers were disproportionately given were more likely to result in foreclosure, exacerbating the already large wealth gap between whites and non-whites.
The article was recently named the 2018 Best Article in the Journal of Urban Affairs by the Urban Affairs Association (UAA) at their annual conference in Toronto. The award committee cited the article as “a model of innovative, meticulous and policy relevant research.”
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