The Changing Face of Inequality in Home Mortgage Lending

Revised January 2005

Richard Williams, Reynold Nesiba and Eileen Diaz McConnell

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Previous versions of this paper examined only the state of Indiana.  The new analysis covers all United States MSAs for the years 1993-2000 and includes numerous revisions and improvements in the discussion.   A slightly revised version of this paper appears in the May 2005 issue of  Social Problems.

Complete Paper (61 pages, 432K)

Online Bibliography (with web links)


American homeownership has long been characterized by racial, ethnic and geographic inequality. Inequality in homeownership, in turn, has contributed to racial and class segregation and inequality in other aspects of American life. Recently, however, there have been signs of dramatic change, as minorities and low-income groups have achieved all time record high rates of homeownership. To explain these developments, we compare and contrast neoclassical economic theory, which suggests that banking deregulation, increased competition, better information and improved risk assessment reduce or eliminate mortgage market discrimination, with a sociological theory of networks that argues industry restructuring can disrupt markets and social relationships and create new opportunities for exploitation. We argue that, as the old inequality in home mortgage lending has slowly diminished, a new inequality has emerged, characterized by less favorable loan terms, sometimes-problematic forms of housing, and a lack of adequate consumer protection from predatory and abusive practices.

Specifically, we describe trends in subprime and manufactured housing lending in United States MSAs. Our study finds that such loans accounted for as much as half or more of the gains made by underserved markets between 1993 and 2000. Subprime lenders made particularly strong inroads among minority markets at all income levels. We discuss how the old inequality helped make the new inequality possible, and how the new inequality in home mortgage lending is part of a much larger phenomenon in which apparent gains made by minorities and low income groups have come at a far higher cost than gains made by other segments of society.

Complete Paper (61 pages, 432K)


The online bibliography includes web page links and electronic database information for many of the sources used in the paper.  Most links were working as of January 2005.

Also available is an earlier version of the paper retitled The Changing Face of Inequality in Home Mortgage Lending in Indiana (49 pages, 315K).  This older version may be useful to those who are specifically interested in Indiana or who want additional background information on subprime and manufactured housing lending that has been cut from later versions.  Results are generally similar to the national analysis, although it appears that subprime and manufactured housing lending have even greater impact in Indiana than they do nationwide.


Residential Segregation and the Transformation of Home Mortgage Lending (Social Forces, December 2007)

Alternative Assessments of GSE Performance, Influence and Impact (Final Report for HUD, May 2006)

The Changing Face of Inequality in Home Mortgage Lending (Social Problems, May 2005)

Are the GSEs Leading, and If So Do They Have Any Followers? An Analysis of the GSEs - Impact on Home Purchase Lending to Underserved Markets During the 1990s (Final Report for HUD, December 2002)

The Effect of GSEs, CRA, and Institutional Characteristics on Home Mortgage Lending to Underserved Markets  (Final Report for HUD, December 1999; slightly revised version published in Cityscape, 2001)

Racial, Economic and Institutional Differences in Home Mortgage Loans: St. Joseph County, Indiana (Journal of Urban Affairs, 1997)