Housing finance as harm

There are two dominant discourses on finance: in the first, finance is the great enabler; in the second, finance is the great divider, the driver of social exclusion. What starts out as finance as an enabler can easily turn into finance as a divider. If someone’s mortgage loan application is accepted, they may see finance as the enabler of homeownership, but if the loan conditions are predatory in nature, finance becomes a means of extraction. This paper focuses on two ways in which housing finance creates harm: redlining and predatory lending. This paper does not discuss new empirical research on redlining or predatory lending, but provides a selective overview of studies documenting these two forms of housing finance as harm. These two forms of housing finance share a number of characteristics related to exclusion, social groups, geography and local impact. Mortgage redlining is a form of place-based discrimination from housing finance. By delineating neighborhoods in which lenders do not grant mortgage loans they exclude households who want to buy a house and those who cannot sell their house. Predatory lending is a subset of subprime lending. Predatory loans are designed to exploit vulnerable borrowers. The rise of predatory lending had little to do with the mantra of emerging homeownership markets. In conclusion, mortgage lenders have the power to harm potential borrowers through direct exclusion (mortgage redlining) or indirect exclusion through overpriced loans (subprime and in particular predatory lending).