Mortgage lending in Middle America: subprime and predatory lending

Hinnant-Bernard, Thessalenuere
Major Professor
Sue R. Crull
Committee Member
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Human Development and Family Studies

This dissertation is composed of two manuscripts, prepared for submission to scholarly journals. The manuscripts relate broadly to discrimination in mortgage lending and more specifically to subprime and predatory lending. The first article is quantitative in nature and is centered around the Home Mortgage Disclosure Act (HMDA) data for the city of Des Moines, Iowa. The second article is a qualitative study using data from Citizens for Community Improvement of Des Moines, Iowa (CCI) and the Iowa Attorney General's office. Each article contributes to the body of research concerning mortgage-lending discrimination.;The general purpose of this dissertation was to determine the prevalence and impact of subprime and predatory lending in Des Moines, Iowa. Lending patterns and marketing strategies, were examined. In this research, the strategies that encouraged households to become victims of predatory lenders were studied. The two objectives were to determine the marketing techniques employed by predatory lenders and examine the characteristics of victims of predatory loans and of borrowers with subprime loans.;The first article discusses subprime lending in the city of Des Moines using HMDA data. The data identify areas of subprime lending and the probability of reverse redlining based on census tracts of the city. Demographic characteristics of the tracts that would indicate reverse redlining are studied in relation to the lending patterns. The data revealed that African-Americans, low-income applicants, and applicants receiving loans for home refinance had a greater probability of becoming victims of reverse redlining than others.;The second article discusses predatory lending and discriminatory marketing techniques utilized in the city of Des Moines, Iowa. Data are generated using interviews conducted by CCI for the CCI/Fannie Mae Anti-Predatory Lending Initiative. Also included in this article is the impact of contract sales, with information from the Attorney General's office. Data generated from interviews conducted by CCI revealed that abusive practices are occurring and that many of these predatory loans are designed with the intention of failing. The marketing tool used most often was repeated telephone calls. Complaints regarding contract real estate sales suggest that abusive contract lending is also thriving in this area.