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Unformatted text preview: Redlining Revisited: Mortgage Lending Patterns in Sacramento 19302004 JESUS HERNANDEZ Abstract Despite decades of government reform, the American housing credit system continues to mirror long-standing patterns of racial segregation and inequality. Consistent with this trend, the current housing crisis reveals an unusually high concentration of subprime mortgage activity and property foreclosures in non-white residential settlements across the nation. Given the generally accepted premise of market neutrality, this case study of lending patterns in Sacramento, California, questions why US housing market exchanges continue to produce racially disparate outcomes and seeks to identify the ideological practices in which race is deployed, informs state and private economic action and shapes contemporary credit market practices. Introduction For quite some time, housing activists and scholars have documented the concentration of subprime loans in US neighborhoods highly populated with non-white residents (Bradford, 2002; ACORN, 2004), and the targeting of non-White borrowers by subprime lenders (Immergluck and Wiles, 1999; Wyly et al. , 2006). The racial and geographic concentration of subprime loans suggests that contemporary lending patterns may be repeating the punitive mortgage redlining practices of past years that aided the decline of many inner cities throughout the US. Squires (2005) notes that the exploitative terms of subprime loans and their concentration in non-white neighborhoods may be just as harmful as the race- and place-based withdrawal of financial services previously imposed on formerly redlined neighborhoods. This reverse redlining referred to by Squires, and the accompanying concentration of mortgage defaults and foreclosures, suggests a long- standing relationship between geography, race and contemporary housing and credit markets. Subprime lending can be simply described as mortgage credit with interest rates substantially higher than those for conventional financing. Generally, subprime lenders target borrowers who have poor credit histories with mortgage products that bring an unusually high yield to lending institutions and their investors. Such excessive profit margins, realized through a pricing structure that includes periodic interest rate increases, prepayment penalties and balloon payments, place a heavy financial burden on borrowers. Consequently, subprime borrowers are 69 times more likely to be in The author thanks Manuel Aalbers, Bruce Haynes, Fred Block and Elvin Wyly for comments on previous drafts of this article. The author also thanks Richard Marciano and the Testbed for Redlining Archives of Californias Exclusionary Spaces (T-Races) project for access to maps and records of the Federal Home Loan Bank Board, National Archives: Record Group 195. Thanks also to Patricia Johnson at the Sacramento Archives and Museum and Collection Center. The author claims responsibility for all errors and opinions contained in this article.and opinions contained in this article....
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