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The Daily Wildcat

The Daily Wildcat

 

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    Subprime crisis could exacerbate racism

    The burst of the U.S. housing bubble and effect on the foreign market (i.e., Northern Rock in the United Kingdom) in recent news should be an immediate red flag to the general public. The predatory practices of subprime lenders in the United States (involving high-interest loans to those with damaged credit) created a surge in housing prices and purchases until foreclosure rates started to rise, as subprime borrowers were unable to afford their mortgages (as expected), at such a high rate that the lenders collapsed under the pressure (i.e., New Century and possibly Countrywide).

    Many of the lenders are reported to have forced applicants to pad their incomes, lie about assets and the sort in order to improve the likelihood of obtaining the high-interest loan. The larger problem comes from the current effect on the domestic and foreign economy as the dollar weakens overseas and markets (Asia) make threats against our economy. Many economists have predicted an upcoming recession, with some going as far as to detail the next Great Depression. Where to nip the problem in the bud is complex as lawmakers point fingers at whom is to blame – borrowers for applying for the subprime mortgage, lenders for encouraging and manipulating borrowers, and the financial markets for investing in a such predatory businesses. Some estimate the crisis will continue for the next few years – beyond 2009.

    A far more fascinating consequence is the possibility of severe redlining and racism once the housing market rebounds (or we’re in a recession). In some cities minorities are as much as four times more likely to have subprime mortgages in comparison to whites. (Since minorities are more likely to have damaged credit scores, they utilized the subprime market more.) With the number of foreclosures on the rise and more minorities displaced, there remains a high possibility lenders will avoid this segment of the population altogether in the future. As a result, minorities may end up unable to live in certain areas of the country, perpetuating a long cycle of neighborhood discrimination.

    Ashley C. Emerole
    junior majoring in political science
    and regional development

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