Federal Reserve Bank of San Francisco

Community Development

Homeownership at High Cost: Foreclosure Risk and High Cost Loans in California

Author(s): Laura Lanzerotti, Federal Reserve Bank of San Francisco

July 2006

Community Development Working Papers

The relatively low rate of mortgage default and foreclosure in California in recent years obscures the fact that many Californians have high-cost home loans that they cannot afford. High cost loans are particularly common in low-income and minority communities, suggesting that those who can least afford it are paying the most for credit. In communities where high cost lending is more prevalent, so is the prevalence of households that are defaulting on their mortgage. Homeownership may be coming at too high a price for these households and communities.

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