Since 1975, the federal government has been collecting data to make sure that minorities get enough mortgages, but nobody set up a system to see if minorities were paying back their mortgages. Thus, when the mortgage market collapsed in 2007-08, there wasn`t much data readily available on who was defaulting on their loans. I started pointing out in 2007 that the circumstantial evidence pointed to this being heavily “diversity-driven.” After all, the government and the media had been making a huge effort to keep minorities from getting too few mortgages, so the most likely mistake was they had gotten too many.
Slowly, academic studies are emerging of who exactly defaulted, and it turns out … I was right. For example:
Katrin B. Anacker, James H. Carr, and Archana Pradhan
Although Prince George’s County, Maryland, is the wealthiest Black/African American county in the nation, the national foreclosure crisis has had a profound effect on it. Using a merged data set consisting of Home Mortgage Disclosure Act (HMDA), U.S. Census, and Lender Processing Services (LPS) data and utilizing a logistic regression model, we analyzed the likelihood of foreclosure in Prince George’s County in the Washington, DC metropolitan area. We found that the borrowers in Black/African American neighborhoods with high-income were 42% more likely and Hispanic/Latino neighborhoods with high income were 159% more likely than the borrowers in non-Hispanic White neighborhoods to go into foreclosure, controlling for key demographic, socioeconomic, and financial variables.
These race differences are after they statistically adjust the heck out of everything. I think it`s also useful to highlight the raw foreclosure rates in Prince George`s County, Maryland:
White: 1.91% (372 foreclosures)
Hispanic: 6.42% (3.4X the white rate, 1,091 foreclosures)
Black: 3.62% (1.9X the white rate, 4,219 foreclosures)
That`s a lot of Hispanic foreclosures for a county famous for its black population.
One thing to keep in mind about these studies is that the national racial gaps might turn out to be even bigger than the regional ones because the studies are typically done of places with a lot of foreclosures, which tend to be pretty vibrant. I haven`t seen anybody yet do a study of defaults in, say, the Dakotas.