SUBPRIME MORTGAGE SEGMENTATION IN THE AMERICAN URBAN SYSTEM

ABSTRACT

Research and policy debates in the United States have focused on the dramatic growth of mortgage lending in the risky subprime sector, which serves consumers with weaker credit histories, and its concentration in racially and ethnically marginalised communities. Evidence linking the subprime boom to the proliferation of predatory abuses, however, is often dismissed as anecdotal or isolated in a few unique places. In this paper, we undertake a geographical analysis of the central justifications for deregulated risk-based pricing: the proposition that subprime credit serves those who would otherwise be excluded, and reduces exclusionary credit denials. Multivariate analyses of metropolitan- and individual-level processes across the US urban system provide evidence suggesting that subprime mortgage segmentation exacerbates rather than reduces traditional inequalities of denial-based exclusion.