Women are prime targets for subprime lending

[[_KaNdii_]]

Women are Prime Targets for Subprime Lending:
Women are Disproportionately Represented in High-Cost Mortgage Market

Allen J. Fishbein
Patrick Woodall

Women are more likely to receive subprime mortgages than men. These gender disparities exist across mortgage product lines. Women with the highest incomes have the highest disparities relative to men with similar incomes than women at lower income levels. The gap is especially pronounced for women of color. African American and Latino women have the highest rates of subprime lending. Moreover, African American and Latino women with the highest incomes have much higher rates of subprime lending than white men with similar incomes. The Consumer Federation of America (CFA) study found these patterns of subprime gender disparity exist for home purchase, refinance and home improvement lending.

Loan pricing data that depicts the size of the subprime market was released by federal banking regulators for the first time last year. In 2006, data covering the pricing of loans made in 2005 became available. The subprime market provides loans to borrowers who do not meet the credit standards for borrowers in the prime market. These loans are generally more expensive for borrowers, with interest rates higher than prevailing prime rates. These higher loan costs presumably compensate lenders for the added risks associated with lending to borrowers with weaker credit histories. Subprime home purchase borrowers may not have adequate income or credit histories to qualify for prime loans in the high-priced housing market of 2005. Most subprime refinance borrowers use the collateral in their homes for debt consolidation and other consumer credit purposes. Subprime lending has grown rapidly as a segment within the conventional mortgage market, growing from 5 percent of mortgage lending in 1994 to 20 percent in 2004.2 In 2005, subprime lending accounted for 26 percent of all loans.

Although lenders attribute subprime lending to borrower credit risk, in general women and men have similar credit profiles. On average, women have slightly higher credit scores than men. Credit-rating company Experian reports that women have slightly higher credit scores than men (682 compared to 675) and have similar credit usage rates (about 24 percent each).

Amongst home buyers, three fifths (62 percent) of single female buyers earn below 80 percent of the Area Median Income compared to about half (49 percent) of single male buyers and a quarter (26 percent) of married couples.5 CFA found that although women with higher incomes had lower incidence of subprime lending than women earning below the Area Median Income, the subprime disparity between women and men grew as incomes rose.

The subprime gender disparity is increasingly important as women ecome more active in the mortgage market. During the recent housing boom, women – especially single women – have become an increasingly important part of the housing market. In part because of the attraction of homes as investments and the later prevailing marriage age, the share of single women home buyers has doubled from about one in ten 15 years ago to about one in five homebuyers in 2003.6 More than half (53 percent) of women headed households are homeowners up from just below half (48 percent) in the early 1980s.7 The number of single women homeowners grew by four million between 1994 and 2002 from 13.9 million to 17.5 million.8

In part, the rising number of women homeowners has been facilitated by the shift to automated underwriting in the 1990s. Rather than facing predominantly male loan officers making decisions based on their personal experience, automated underwriting used more objective formulas that are less likely to take gender-related factors into account.9 Additionally, the rising number of loan products, flexible underwriting, and subprime lending have increased the availability of mortgage credit for women.10

However, CFA’s findings suggest that although there are more women homebuyers than ever before, many of them are borrowing higher-cost, subprime mortgages – especially relative to male borrowers. Over the life of the mortgage, subprime borrowers can pay between $85,000 thousand to $186,000 more in interest than average borrowers. The prevalence of subprime loans among women borrowers diminishes their ability to fully utilize homeownership as a pathway to build wealth. CFA’s key findings include:

Women are more likely to receive subprime and higher-cost mortgages: About a third (32.0 percent) of women borrowers receive subprime mortgage loans of all types compared to about a quarter (24.2 percent) of male borrowers – making women 32 percent more likely to receive subprime mortgages than men. More than one in ten (10.9 percent) women received high-cost subprime mortgages compared to about one in thirteen (7.7 percent) men – making women 41 percent more likely to receive higher-cost subprime loans with interest rates more than 5 percentage points higher than comparable Treasury notes.11

Women are significantly over-represented in the pool of subprime mortgages.
Although women make up 30.0 percent of borrowers for mortgages of all types, they make up 38.8 percent of subprime borrowers – a 29.1 percent over-representation. This over-representation of women in the subprime mortgage pool exists for all types of mortgages but is especially true of refinance and home improvement loans which are more likely to be subprime and predatory mortgages.

Women are more likely to receive subprime mortgages of all types regardless of
income, and disparity between men and women increases as incomes rise. For purchase mortgages, women earning double the median income are 46.4 percent more likely to receive subprime mortgages than men with similar incomes. In contrast, women earning below the area median income are 3.3 percent more likely to receive subprime mortgages. Women earning between the median and twice the median income are 28.1 percent more likely to receive subprime purchase mortgages than men.

Women of color are the most likely to receive subprime loans and white men are
the least likely to receive subprime loans at every income level and the gap grows
with income. African American women earning below the area median income are nearly two and a half times more likely to receive a subprime purchase mortgage than white men and Latino women earning below the area median are nearly twice as likely to receive subprime purchase mortgages as white men.The gap is much higher at incomes above twice the area median income. Upper income African American women are nearly five times more likely to receive subprime purchase mortgages than upper income white men and upper income Latino women are nearly four times more likely to receive subprime loans than upper income white men.

Women are more likely to receive subprime mortgages than men of the same race and women of color are much more likely to receive subprime mortgages than white men. For purchase mortgages, African American women were 5.7 percent more likely than African American men to receive subprime mortgages; Latino women were 12.7 percent more likely than Latino men to receive subprime mortgages; and white women were 25.8 percent more likely to receive subprime purchase mortgages than white men. African American women were 256.1 percent more likely to receive subprime purchase mortgages than white men and Latino women were 177.4 percent more likely to receive subprime mortgages than white men.

Full report: http://www.consumerfed.org/pdfs/WomenPrimeTargetsStudy120606.pdf

[ineed<3]

this fits well into my plan.

marry a woman with a career and drink beer every day in the pool

btw this should be in the women's section

[[_KaNdii_]]

There's a women's section? 

[Knight]

Since last night. Anita overthrew Investigator's reign.
EDIT: Wait what the hell does reign mean?

[Bob]

It'd adjust the title to: women of colour are the prime targets for subprime lending:

From the report:

46.7% (African-American)
34.4% (Latino)
28.4% (White)

White women are under represented. In addition the gap between black men and women is minimal (5.7% higher probability) meaning that the former are over represented as well.

In fact, black men over represent sub-prime borrowers (55.6%, >3% and 21.9%, >5% subprime) vs. white women (31.9% and 10.8% respectively). The same applies to Hispanic men (38.1% and 12.1%) suggesting that this subprime disparity is highly racialized. The sexism component while important is overshadowed by the racist counterpart especially considering white men fall under 30.2% and 10.2% respectively.

[kittenslayer]

It's pretty shocking at the amount of girlz who have "shopping addication" when theyare earning $10 an hour!!!!

[Bob]

It's pretty shocking at the amount of girlz who have "shopping addication" when theyare earning $10 an hour!!!!

Yes, females make up the majority (86%) of the consume market. It's very striking that it's quite racialized in the consumer end, but without an prominent racial gap that cushion white women:

28% of black women said they had spent over $200 on clothes in the past month, compared with 14% of Latinas and 12% of Caucasian women. Link

In sum, women, and more prominently, women of colour, subsidizes the consumer sector which is still highly sexist in terms of remuneration especially at the manufacturing and retail end.

Income and insurance (exemplifying dysfunctional spending):

Women earn just 77 cents for every dollar earned by a man when job, age, education and region are the same. African American women earn just 64 cents and Hispanic women earn just 52 cents for every dollar earned by a white man.

Nationwide, nearly one in five women ages 18-64 remain uninsured. And the disparities between White women and minority women who have health insurance are disturbing: 37.8% of Hispanic women, 35.9% of American Indian/Alaska Native women, and 22.7% of Black women do not have health coverage, compared to 16.9% of White women.