Homeownership is at an all-time high in America. During the 1990s, the United States experienced one of the longest periods of economic expansion in its history. A cycle marked by robust growth and benign inflation made borrowing easier for would-be homebuyers. At the same time, lenders found greater incentive to open access to borrowers of all socioeconomic classes. In fact, conventional loans to low-income buyers leapt 75 percent between 1993 and 1998. Minority buyers increased at a pronounced rate, with blacks seeing 95 percent growth and Hispanics 78 percent. This growth in lower-income and minority homebuyers helped fuel the ascent of the subprime mortgage market, which grew at an eye-popping 880 percent.
Unfortunately, the largely beneficial subprime market was not the only segment of the lending community to enjoy rapid growth during the last decade. Abusive lenders found the climate hospitable for increasingly aggressive "predatory" lending practices targeting less-sophisticated consumers, particularly in the minority and elderly communities.
Only recently have legitimate lenders, community activists and political leaders come together to try to stop such practices, which in the worst cases can cost the victims their homes. Campaigns against predatory lending in North Carolina, New York City, Chicago and Philadelphia are drawing attention. But right here in the Eighth District is a city that has been seen by many as a role model in this movement: Evansville, Ind.
Evansville's story—from the fingerpointing in the beginning to a mysterious FBI investigation to the formation in the end of an industrywide best practices committee—is the centerpiece of this special issue of Bridges. The hope is that others can learn from the problems in Evansville and from that community's effort to resolve them.
Keep up with what’s new and noteworthy at the St. Louis Fed. Sign up now to have this free monthly e-newsletter emailed to you.
FedCommunities.org is a portal to community development resources from all 12 Federal Reserve Banks and the Federal Reserve Board of Governors.