The Unintended Consequence of Predatory Lending: An Examination of Mortgage Lending in Philadelphia, Pennsylvania

Author: Kristen B. Crossney

Dissertation School: State University of New Jersey

Pages: 198

Publication Date: May 2006

Availability:
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Access Number: 10809

Abstract:

For most households in the United States, the majority of their wealth or assets exist within the equity of their home. In the past decade, predatory lending has arisen as a danger to homeowners by increasing the threat of foreclosure and bankruptcy. Predatory lending is usually understood to have excessive terms or rates that are inappropriate, and so disadvantageous to borrowers that it is considered abusive.

This dissertation examines the occurrence of predatory lending in Philadelphia, Pennsylvania, drawing on public mortgage and property data. Predatory lending was found to be significantly clustered, occurring in a distinct spatial pattern. Racial minorities seem to be affected more by predatory lending than are Whites. The significant differences in neighborhood context variables suggest that areas with clusters of predatory activity are more challenged and economically disadvantaged. Socioeconomic differences between these two types of areas indicate that those affected are lower status. Subprime lenders were most active in tracts containing predatory mortgages.

The results indicate that predatory lending is likely affecting those who have struggled to access the housing and mortgage market and the benefits of homeownership and asset accumulation, and that predatory lending is likely an unintended consequence of federal housing and mortgage policy. The characteristics of areas experiencing predatory lending are remarkably similar to the target population of many government initiatives aimed at improving neighborhood quality and promoting homeownership, efforts of which are likely to be hampered by the persistence of predatory lending. It is extremely concerning, and likely a paradox, that those historically most in need of fair lending opportunities, and those targeted by numerous government policies for fair and equal lending and housing opportunities are those currently most in danger of being preyed upon.

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