Dr. Gobar will be visiting Oklahoma to present the results of her research in full.  She will be speaking Wednesday night, March 15th at the Oklahoma City Memorial Museum and Thursday night March 16th at the Mayo Hotel in Tulsa.  Click here to RSVP and view more information about these events and here for a presentation on the racial wealth gap.

The boom in subprime mortgage lending in the early 2000s is widely recognized as the underlying cause of the country’s recent financial crisis and subsequent Great Recession.  Subprime mortgages are loans offered at interest above the prime rate.  When millions of homeowners began to default on their high-interest subprime mortgages in 2007, the bottom fell out of the housing market.  This set off a chain reaction that threatened the nation’s largest financial institutions, who had sunk trillions into unsustainable mortgages on overvalued properties.  Much of the blame falls on the financial institutions themselves, whose predatory practices and reckless behavior has since been scrutinized and rejected.

This post examines the subprime lending boom in Oklahoma, where the housing market continues to outshine harder-hit states.  In many other states (particularly Arizona, Nevada, Florida, and California), widespread foreclosures and plummeting home values have hampered economic recovery.  How bad was the housing crisis in Oklahoma?  The following data are from a research paper by Dr. Angela Gobar sponsored by Howard University’s Center on Race and Wealth.  Dr. Gobar’s paper, which you can view here, analyzed mortgage loans originated in Tulsa and Oklahoma City during and after the subprime lending boom.  The two ‘metropolitan statistical areas’ examined in the paper contain 60 percent of the state’s population and are representative of the housing market overall.

Oklahoma City and Tulsa experienced their largest volume of subprime lending as well as their widest interest rate spread during 2006.  For both Tulsa and Oklahoma City, the average rate spread between a prime and a subprime mortgage loan peaked at 5 percentage points in 2006.  So for instance, if the average prime mortgage was offered at 5 percent, then the average subprime mortgage loan was financed at 10 percent.  The total volume of subprime lending soared between 2004 and 2006 and likely displaced much of the market’s prime lending activity, which plummeted during that same period. Read the rest of this entry »

Yesterday’s New York Times had a sobering profile of the housing market in Cleveland, which has experienced the post-boom collapse earlier and more deeply than most of the rest of the nation. While the situation in Cleveland, as elsewhere, has many causes and more than enough blame to go around, the piece includes a telling passage about what happened when Cleveland tried to take action against the predatory lenders who took over the subprime lending market in the early 2000′s to make unaffordable loans to homeowners crammed full of high costs and fees. Read the rest of this entry »