UCLA

The opportunity to own a home in a decent neighborhood is a basic part of the American dream and has been a fundamental goal of housing policy for the last 80 years. Yet there are deep and persisting racial differences in the realization of this dream which have been intensified by the Great Recession. This dissertation attempts to explain the origins of this disparity, its strong connection to the home finance system, and its contemporary function in the alarming increase in the already massive racial wealth accumulation gap found in the United States. This study is guided by the following research questions: How have foreclosures impacted minority borrowers? How have foreclosures impacted mortgage lending for minority borrowers since the housing market crash? And what is the estimated wealth loss for minority families after foreclosure?

An analysis of race on foreclosures and loan application outcomes in six Southern California counties for a period of 8 years between 2006 and 2013 was conducted. A negative binomial regression of proprietary foreclosure data indicates that foreclosures increase with increases in the population of Blacks or Latinos in a census tract. This effect decreases with the addition of demographic variables commonly associated with loan performance—however, those demographic variables are correlated with race. A mixed Poisson model using data from the Home Mortgage Disclosure Act indicates that even as the number of loan applications drops substantially over time, the proportional disadvantage in prime loan denial and subprime loan origination rates faced by Blacks and Latinos remains fairly consistent. A simple mathematical model estimated that in aggregate, both Black and Latino homeowners lost twice as much wealth held in home value as did Whites and Asians. While many reasons for this phenomenon are possible, Critical Race Theory suggests that these disparities are the result of systemic bias deeply rooted in historical advantages enjoyed by White families in this country.