U.S. women are more likely than men to receive a predatory loan, despite a tendency to have better credit scores (India Times, 2008). The India Times cites a report from the Consumer Federation of America (2006, pdf) which found that sex and race both affected the types of loans taken out: 1/3 of women compared to 1/4 of men accepted "subprime" loans, nationwide. According to a poll commissioned by Freddie Mac, only 37% of "prime" borrowers are women, compared to 46% of subprime borrowers (Lax et al, 2004). These types of lending practices contribute to the climate where women and minorities are less likely to build wealth and own homes, as we discussed in 2006 (see "Home Ownership").
I should make it clear: race appears to be a much greater factor than gender in these articles. Education also seems to affect the types of mortgages taken.
When we purchased our condo two years ago, I did most of the mortgage shopping. I have to say: most of the lending agents I talked to at least tried to offer me a crappy ARM. I had to make it fairly clear up front that I wasn't at all interested, and that they shouldn't bother. I can't help but feel that this is a problem that could be largely fixed by financial literacy education. Certainly, there are pressures on a lower-income family that would make it harder for them to turn down a predatory loan. What other privileges am I ignoring?
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Monday, November 10, 2008
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5 comments:
piterburg
2008-11-10 08:48 pm UTC (link)
//I can't help but feel that this is a problem that could be largely fixed by financial literacy education.//
I feel the same way. Financial literacy (along with relationship literacy) should be taught in high school, instead of esoteric subjects like calculus.
[info]dan4th
2008-11-11 02:44 am UTC (link)
eek. I'm not sure I'm prepared to say "instead" of calculus, but it seems like it would be part of math.
I guess what bothers me is that it seems unlikely that men are getting better financial literacy education at school. I see three options. Tell me if you see more:
1. Lenders are offering different loans to men and women.
2. Women are not as good at negotiating better loans - possibly unaware that they can.
3. Men are getting the financial literacy education somewhere OTHER than school.
actually, 2 & 3 seem related. The ability to negotiate is part of financial literacy.
piterburg
2008-11-13 01:56 am UTC (link)
Of course men are NOT getting better financial literacy education at school.
1. I do not think lenders as a group discriminate on the basis of gender. However, it might very well be that women having more trouble qualifying for loans with better terms because being a female often means smaller income and larger number of dependents to support.
I wonder whether women would still be more likely to get worse terms if we control for income and expenses.
2. From my personal observations women are actually better bargainers, more skillful and patient. On the other hand, they tend to be intimidated more easily while negotiating with large corporate structures like banks or insurance co's.
3. SOME men (esp. upper- and upper-middle-class WASP'y men) are getting their financial literacy from their male relatives and later on in life from their similarly situated professional/businessmen/executive buddies thru informal channels.
I do think that introducing FORMAL financial literacy education would eventually greatly reduce the kind of wrong financial decision-making on part of many people, just as formal sex ed in schools greatly reduced the number of unwanted pregnancies.
(Reply to this)(Parent)(Thread)
[info]dan4th
2008-11-13 02:56 am UTC (link)
I can't speak to #2 or #3, but the studies above do control for income. A black woman and a white man making the same amount of money are likely to be offered different loans.
piterburg
2008-11-13 03:10 am UTC (link) Track This
//A black woman and a white man making the same amount of money are likely to be offered different loans//
But here we have BOTH race and gender factors in action, we have to control for race in order to isolate gender factors.
I've personally observed that black men were often offered much lower settlements than white men in auto accident property damage claims. These actions did not represent insurance companies' policies, but rather actions of individual adjusters, who were (older) white males.
I have not observed any similar immediately noticeable difference in settlements offered to white males and white females.
(Settlement of auto insurance claims is a matter I tangentially deal with in my professional, capacity, I watch over several such settlements every day.)
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