What Women Should Know About the Subprime Mortgage Crisis - Predatory Lending

You're a woman who's heard the phrase 'subprime mortgage crisis' but not fully understood the basis of what's going on.

A good place to start learning about the issue - including how gender bias has made women particularly vulnerable - is the excellent and easy-to-understand Women's eNews article "Women's Credit Profiling Called Costly, Ignored." Follow that with About.com Kimberly Amadeo's detailed primer on the subprime mortgage crisis.

Why single out women in this matter? Many female home buyers whose credit histories are good and who should have qualified for conventional mortgages have been steered to subprime mortgages - the ones that have been in the headlines for causing the current stock market decline.

This 'steering' is due to gender bias and puts women at risk of being victimized by predatory lenders, reports Allison Stevens of Women's eNews:

Allen Fishbein, director of credit and housing policy at the Consumer Federation of America, a think tank and lobby in Washington, D.C. ....identified discriminatory credit profiling of women in a December 2006 report....Fishbein noted that lenders have been more likely to treat women as riskier borrowers--and sell them higher-priced "subprime" loans as a consequence--even though they have slightly higher credit scores than men.

Women and men use credit at the same rate, and women have an average credit score of 682, slightly better than men's 675 average, the report said. Still, about one-third of female borrowers took on subprime mortgages compared to about one-quarter of men, a discrepancy Fishbein attributes partly to gender discrimination.

Being categorized as a subprime borrower costs money. Homeowners in that category pay between $85,000 and $186,000 more over the life of their loans and divert a greater share of their monthly payments to paying off interest rather than building equity. This deprives them of an equal opportunity to build wealth through homeownership, Fishbein said....

The consequences of discrimination are severe: Subprime borrowers are more likely to face foreclosure than homeowners with lower-priced mortgages.

And that's what we're seeing right now.

Congress is looking at bills that could help certain borrowers avoid foreclosure. Many of these borrowers are women. Yet the discriminatory practices continue.

Legislation like the Fair Housing Act and the Equal Credit Opportunity Act are attempts to eliminate gender bias.

But as we can see from the current crisis, women continue to be made financially vulnerable by those who won't give them the same credit as men.

Photo © Jeff J. Mitchell/Getty Images

Related article: Understanding the Subprime Mortgage Crisis