University of Pittsburgh
March 22, 2007

"Higher Rates of Loan Defaults and Foreclosures Associated With Subprime Loans Have Had and Will Continue to Have Undeniably Negative Consequences for Low-income and Minority Communities," Pitt Expert Says

Pitt Prof. Angela Williams Foster available for comment in the wake of yesterday's Senate Banking Committee hearing on problems in the subprime market
Contact:  412-624-4147

PITTSBURGH-According to an article in yesterday's "The New York Times," as problems with subprime mortgages escalate, officials on Wall Street and in Washington are urging lenders and the government to step in and cushion the blow to troubled borrowers and find ways to enable them to remain in their homes.

Angela Williams Foster, professor of public and urban affairs in the Graduate School of Public and International Affairs at the University of Pittsburgh, and a housing expert, says one of the most important reasons to re-tool such policy is that the fluctuations of subprime lending inordinately affect the minority community.

Because many minorities have had unpleasant experiences in seeking prime mortgages, they often go to lenders who more easily grant subprime mortgages, Foster notes. "The subprime market plays a role in placing homes within reach of previously underserved markets," she says. "But that also means those underserved markets are more vulnerable when the mortgage rates take a hit."

For these reasons, she says, greater scrutiny of subprime policies and greater regulation are desirable. But, in the process, regulators should be cautious not to diminish the ability of low-income and minority borrowers to be homeowners.

Policy actions should not be merely reactive in helping households who are about to lose their homes, but proactive by better informing potential borrowers of the risks associated with subprime loans. Borrowers should be armed with information that enables them to spot fraudulent practices that are associated with some subprime loans. One potential policy action would be to offer low-income borrowers with free legal assistance on interpreting the loan documentation prior to loan origination.

For a list of Pitt faculty experts, visit