Magazine article Stanford Social Innovation Review

Editors' Note

Magazine article Stanford Social Innovation Review

Editors' Note

Article excerpt

IN "MICROLOAN SHARKS," JONATHAN C. LEWIS attacks what he sees as greed and profiteering in microfinance-an industry celebrated for its potential to alleviate poverty. We are struck by the similarities between these foreign "banks gone wild" and the financial institutions here in the United States that got rich quick by funding and securitizing subprime mortgages-often to lower-income people who neither understood nor had the funds to cover the skyrocketing payments. The resulting subprime mortgage crisis is wreaking havoc not only on these financial institutions, but also on the millions of families who are defaulting on their mortgages.

By the time the subprime mess runs its course, upwards of 3 million families will lose their homes, estimates Martin Bakes in this issue's "15 Minutes" interview. Bakes is the founder and CEO of Self-Help, an organization that enables low-income people to obtain loans to buy homes and start businesses. If Bakes is right, subprime foreclosures will force nearly 30 times more families out of their homes than did Hurricane Katrina.

As was the case with Katrina, the subprime fiasco is hurting some more than others. In the last three years, between 50 and 60 percent of all home loans to African Americans and 40 percent of loans to Latinos were subprime, says Bakes. Women were 32 percent more likely to end up with subprime loans than men, even though both sexes had similar credit scores.

Most people with subprime mortgages were ordinary people trying to buy modest homes. (Speculators made up just 10 percent of subprime borrowers. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.