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Fair Credit and Fair Housing in the Wake of the Subprime Lending and Foreclosure Crisis

Fair Credit and Fair Housing in the Wake of the Subprime Lending and Foreclosure Crisis
2010Fair Credit/Fair Housing

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In the fall of 2007, the Kirwan Institute initiated a comprehensive research initiative on the emerging subprime lending and foreclosure crisis and its impact on communities of color across the nation. In October of 2008, a month after the failure of Lehman Brothers, Kirwan held a national convening that drew together academic researchers, community advocates, fair housing attorneys, civil rights workers, and keynote speakers such as James H. Carr from the National Community Reinvestment Coalition, and Paul Hudson of Broadway Federal Bank. The convening was designed to comprehensively understand the roots of the crisis and to better arm advocates and policymakers with effective, strategic responses. The commissioned research and convening speakers emphasized the historical and geographic exclusion of communities of color from fair credit as a significant factor in the crisis

The long-term development of unequal and underserved credit markets and their pent-up demand intersected with the development of modern, globally distributed financial instruments and the rollback of regulations designed to separate banking and finance functions and segment markets geographically. This increasingly monopolistic banking and finance landscape along with the global appetite for federally guaranteed securities fed increasingly irresponsible, and in some cases fraudulent and predatory, mortgage lending. When the housing bubble burst, borrowers began to default on mortgages largely untenable beyond their origination; the result was a massive wave of foreclosures which began to destabilize families, neighborhoods, and entire communities. It was not long before investors realized that the “guaranteed” securities they held were threatened by the extraordinary scope of mortgage defaults. These investors began runs on investment banks and ultimately, insurers. The failure of some investment banks and the government-engineered rescue of “too big to fail” financial institutions (including the predominant secondary-market insurers Fannie Mae and Freddie Mac) had begun.