Who’s at-risk? A case study of the demographic and socioeconomic characteristics of census tracts experiencing predatory and abusive mortgage lending in Philadelphia

Abstract

Predatory lending and abusive practices arose as a serious danger by increasing the threat of foreclosure and bankruptcy and decreasing the equity accumulated in a housing unit, reducing many of the economic benefits of homeownership. This article describes the characteristics of areas who likely suffered from abusive mortgage lending using Census data, Home Mortgage Disclosure Act data, and publicly recorded mortgage data. A proxy measure of predatory lending is developed based on the loan-to-value (LTV) ratio and state anti-predatory lending regulations, and represents excessively leveraged properties. Discriminant analysis is used to distinguish between areas with these highly leveraged properties and other parts of the City of Philadelphia. The residuals are mapped to evaluate the spatial dimension of the discriminant models across the city. This examination of demographic and socioeconomic characteristics informs efforts to mitigate the consequences and prevent future occurrences of both predatory lending and other manifestations of inequality by viewing it as a spatial and neighborhood phenomenon.