Race, class and spatial dimensions of mortgage lending practices and residential foreclosures

Abstract

The American dream of homeownership for low‐income minority households has been sustained by reliance on a complex web of public programs and private institutions during the past several decades. This paper explores the racial, class and spatial dimensions of mortgage lending practices and residential foreclosures for underserved neighborhoods in Cuyahoga County, Ohio using multiple regression analysis with a spatial‐lag model. This paper shows different spatial dimensions of subprime and government‐backed loans. It reveals that subprime loans are the most influential factor explaining neighborhood foreclosure rates. This paper also demonstrates that neighborhoods with low‐income and minority households have a higher likelihood of experiencing higher rates of foreclosure. We recommend introducing targeted government programs in areas avoided by traditional lenders. These programs could reduce the foreclosure rate for homeowners that have the ability to sustain their homeownership.