Abstract

Concentration of subprime lending in certain neighborhoods can cause adverse consequences for borrowers and communities. This paper presents an empirical analysis of how race and ethnicity, income levels, and other neighborhood characteristics explain the distribution of higher-priced mortgages in Atlanta. Higher concentrations of higher-priced mortgages are found in low-income neighborhoods and predominantly African American neighborhoods. Additionally, individual African American and Hispanic borrowers are more likely to receive higher-priced loans regardless of the profile of the neighborhoods in which they live. We examine the role of the Federal Housing Administration (FHA) in those markets; results suggest that FHA and higher-priced lending are complementary products that serve many of the same neighborhoods where the prime conventional share is relatively low.