Subprime Meltdown Hits Brooklyn the Hardest

According to The Federal Reserve Bank of New York, the 11233 zip code that encompasses Bedford-Stuyvesant and Crown Heights had the highest foreclosure rates for subprime mortgages in the entire nation in October. More than one in four people, or 25.2%, with subprime loans in the zip code lost their homes to foreclosure. That's almost four times the national average of 6.9%.

It's a stark example of the toll that the lending meltdown is taking on poorer neighborhoods. Those areas' residents were able to get loans in spite of poor credit histories or with little money down. Exposure to higher interest rates left these homeowners in a precarious position.

The Daily News reported that a 2006 study indicated that Blacks and Latinos were offered interest rates 30% higher than people outside of those groups with a similar credit history. One can see in the map at left the disproportionate affect the lending crisis is having on minority neighborhoods.

Over the summer, the city recorded increases in home foreclosures everywhere except Staten Island. Financial markets and banks are taking huge hits on their investments in subprime loans, with Citigroup writing down billions in bad debts and having to seek an infusion of additional capital. Investment bank Goldman Sachs, however, made several billion dollars in just a few weeks by betting the opposite direction of everyone else on the Street.

Contact the author of this article or email tips@gothamist.com with further questions, comments or tips.

By Dave Hogarty in News on January 26, 2008 10:40 AM

Comments [rss]

books

property values have gone up to ridiculous levels because people bought homes they couldnt afford ....I don't sympathize with forclosures that have nothing to do with job market and everything to do with greed

nik13

Ironic that several years ago people from same neighborhoods whined about being "red-lined". Now they got their loans, they didn't really qualify for

& still whine.

Life is tough, but it's tougher when you're stupid.

angry_pickle

Actually, only American and western European banks are holding significant number of these useless loans. The rest of the world either didn't have access to these securities, had alternative securities in their own country, or just weren't dumb enough to buy them.

solidago

What's stupid is the perverted financial system that required only the people at either end of the chain - the folks losing their houses in Crown Heights, and the sucker institutional investors across the world holding the radioactive CDO tranches - to hold the bag. In between, from the Brighton Beach hustler originating the mortgages, to the structured finance MD at Barclays putting together the CDOs, to all the lawyers, rating agencies, etc polishing these turds, everyone had the opportunity to get their cut and shuffle the risk off to someone else. These intermediaries only got hurt when they were so blinded by greed that they didn't see that the music was about to stop. Back in the day Alan Greenspan was raving about how great it was that the banks had gotten so adept at unloading risk with their fancy structured finance products. Now the consequences are showing up in Crown Heights, and not just in billion dollar pension funds halfway around the globe. Perhaps now the men behind the curtains will realize that taking on risk is essential to making prudent decisions and will require that everyone along the way take a cut - of the risk.

Spirit of 76

I'm surprised. Crown Heights never seemed to be much of an owner's neighborhood to begin with. Except for maybe a few streets with brownstones, all I remember are buildings that can't possibly have condos or co-ops. It seems more like a renter's neighborhood.

HughGass

are the stupid because they're poor? or are they poor because they're stupid? or are they poor because they're black/latino? are they stupid because they're black/latino? no subprime crisis in 10021, or 10023. same story, over and over again.