Kristopher S. Gerardi and Paul S. Willen
Working Paper 2009-1
February 2009

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This paper analyzes the impact of the subprime mortgage crisis on urban neighborhoods in Massachusetts. We explore the topic using a data set that matches race and income information from Home Mortgage Disclosure Act data with property-level, transaction data from Massachusetts Registry of Deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proved exceptionally unstable in the face of rapid price declines. The evidence in Massachusetts suggests that subprime lending did not, as commonly believed, lead to a substantial increase in homeownership by minorities but instead generated turnover in properties owned by minority residents. Furthermore, we argue that the particularly dire foreclosure situation in urban neighborhoods actually makes it somewhat easier for policymakers to provide remedies.

JEL classification: D11, D12, G21

Key words: subprime, foreclosure, minority, homeownership

This paper was prepared for the conference "The Mortgage Meltdown, the Economy, and Public Policy," cosponsored by UCLA and UC-Berkeley on October 30–31, 2008. The authors thank the organizers for suggesting the topic, their discussants (Mark Garmaise, Alexei Tchistyi, and Walt Torous), and participants at the symposium for helpful comments and suggestions. They also thank Scott Frame for helpful suggestions. They are grateful to the Warren Group for the data and for assistance of all kinds and to Julia Reade of the Supervision, Regulation, and Credit Unit of the Boston Fed for writing many of the programs used to perform the HMDA-Warren match and for making much of the research discussed below possible. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content to Kristopher S. Gerardi, Research Economist and Assistant Policy Adviser, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8561,, or Paul S. Willen (corresponding author), Senior Economist and Policy Adviser, Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, MA 02210, 617-973-3149,

For further information, contact the Public Affairs Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, 404-498-8020.