50 years after the federal Fair Housing Act banned racial discrimination in lending, African-Americans and Latinos continue to be routinely denied conventional mortgage loans at rates far higher than their white counterparts.<\/p>\n
This modern-day redlining persisted in 61 metro areas even when controlling for applicants\u2019 income, loan amount, and neighborhood, according to a mountain of Home Mortgage Disclosure Act records analyzed by Reveal from The Center for Investigative Reporting.<\/p>\n
The yearlong analysis, based on 31 million records, relied on techniques used by leading academics, the Federal Reserve, and the Department of Justice to identify lending disparities.<\/p>\n
It found a pattern of troubling denials for people of color across the country, including in major metropolitan areas, such as Atlanta, Detroit, Philadelphia, St. Louis, and San Antonio. African-Americans faced the most resistance in Southern cities \u2014 Mobile, Alabama; Greenville, North Carolina; and Gainesville, Florida \u2014 and Latinos in Iowa City, Iowa.<\/p>\n
No matter their location, loan applicants told similar stories, describing an uphill battle with loan officers who they said seemed to be fishing for a reason to say no.<\/p>\n
\u201cI had a fair amount of savings and still had so much trouble just left and right,\u201d said Rachelle Faroul, a 33-year-old black woman who was rejected twice by lenders when she tried to buy a brick row house close to Malcolm X Park in Philadelphia, where Reveal found African-Americans were 2.7 times as likely as whites to be denied a conventional mortgage.<\/p>\n
The analysis \u2014 independently reviewed and confirmed by the Associated Press \u2014 showed black applicants were turned away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine, and Native Americans in three. In Washington, D.C., the nation\u2019s capital, Reveal found all four groups were significantly more likely to be denied a home loan than whites.<\/p>\n
\u201cIt\u2019s not acceptable from the standpoint of what we want as a nation: to make sure that everyone shares in economic prosperity,\u201d said Thomas Curry, who served as America\u2019s top bank regulator, the comptroller of the currency, from 2012 until he stepped down in May 2017.<\/p>\n
Yet Curry\u2019s agency was part of the problem, deeming 99% of banks satisfactory or outstanding based on inspections administered under the Community Reinvestment Act, a 40-year-old law designed to reverse rampant redlining. And the Justice Department has sued only a handful of financial institutions for failing to lend to people of color in the decade since the housing bust. Curry argued that the law shares part of the blame; it needs to be updated and strengthened.<\/p>\n
\u201cThe Community Reinvestment Act has aged a lot in 40 years,\u201d he said.<\/p>\n
Since Curry departed nine months ago, the Trump administration has gone the other way, weakening the standards banks must meet to pass a Community Reinvestment Act exam. During President Donald Trump\u2019s first year in office, the Justice Department did not sue a single lender for racial discrimination.<\/p>\n
The disproportionate denials and limited anti-discrimination enforcement help explain why the homeownership gap between whites and African-Americans, which had been shrinking since the 1970s, has exploded since the housing bust. It is now wider than it was during the Jim Crow era.<\/p>\n
This gap has far-reaching consequences. In the United States, \u201cwealth and financial stability are inextricably linked to housing opportunity and homeownership,\u201d said Lisa Rice, executive vice president of the National Fair Housing Alliance, an advocacy group. \u201cFor a typical family, the largest share of their wealth emanates from homeownership and home equity.\u201d<\/p>\n
The latest figures from the U.S. Census Bureau show the median net worth for an African-American family is $9,000, compared with $132,000 for a white family. Latino families did not fare much better at $12,000.<\/p>\n
Lenders and their trade organizations do not dispute the fact that they turn away people of color at rates far greater than whites. But they maintain that the disparity can be explained by factors the industry has fought to keep hidden, including the prospective borrowers\u2019 credit history and overall debt-to-income ratio. They singled out the three-digit credit score \u2014 which banks use to determine whether a borrower is likely to repay a loan \u2014 as especially important in lending decisions.<\/p>\n
\u201cWhile quite informative regarding the state of the lending market,\u201d the records analyzed by Reveal do \u201cnot include sufficient data to make a determination regarding fair lending,\u201d the Mortgage Bankers Association\u2019s chief economist, Mike Fratantoni, said in a statement.<\/p>\n
The American Bankers Association said the lack of federal enforcement proves discrimination is not rampant, and individual lenders told Reveal that they had hired outside auditing firms, which found they treated loan applicants fairly regardless of race.<\/p>\n
\u201cWe are committed to fair lending and continually review our compliance programs to ensure that all loan applicants are receiving fair treatment,\u201d Boston-based Santander Bank said in a statement.<\/p>\n
New Jersey-based TD Bank, which denied a higher proportion of black and Latino applicants than any other major lender, said it \u201cmakes credit decisions based on each customer\u2019s credit profile, not on factors such as race or ethnicity.\u201d<\/p>\n
Reveal\u2019s analysis included all records publicly available under the Home Mortgage Disclosure Act, covering nearly every time an American tried to buy a home with a conventional mortgage in 2015 and 2016. It controlled for nine economic and social factors, including an applicant\u2019s income, the amount of the loan, the ratio of the size of the loan to the applicant\u2019s income, and the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property.<\/p>\n
Credit score was not included because that information is not publicly available. That\u2019s because lenders have deflected attempts to force them to report that data to the government, arguing it would not be useful in identifying discrimination. \u00a0<\/p>\n
In an April policy paper, the American Bankers Association said reporting credit scores would be expensive and \u201ccloud any focus\u201d the disclosure law has in identifying discrimination. America\u2019s largest bank, JPMorgan Chase & Co., has argued that the data should remain closed off even to academics, citing privacy concerns.<\/p>\n
At the same time, studies have found proprietary credit score algorithms to have a discriminatory impact on borrowers of color.<\/p>\n
The \u201cdecades-old credit scoring model\u201d currently used \u201cdoes not take into account consumer data on rent, utility, and cell phone bill payments,\u201d Republican Sen. Tim Scott of South Carolina\u00a0wrote in August, when he unveiled\u00a0a bill to require the federal government to vet credit standards used for residential mortgages. \u201cThis exclusion disproportionately hurts African-Americans, Latinos, and young people who are otherwise creditworthy.\u201d<\/p>\n
Philadelphia was one of the largest cities in America where African-Americans were disproportionately turned away when they tried to buy a home. About the same number of African-Americans and non-Hispanic whites live in the City of Brotherly Love, but the data showed whites received 10 times as many conventional mortgage loans in 2015 and 2016.<\/p>\n
Banks also focused on serving the white parts of town, placing nearly three-quarters of their branches in white-majority neighborhoods. Reveal\u2019s analysis also showed that the greater the number of African-Americans or Latinos in a neighborhood, the more likely a loan application would be denied there \u2014 even after accounting for income and other factors.<\/p>\n
When Faroul applied for a loan in April 2016, she thought she was an ideal candidate. She holds a degree from Northwestern University, has a good credit score, and estimates she was making $60,000 a year while teaching computer programming as a contractor for Rutgers University. Still, her initial loan application was denied by Philadelphia Mortgage Advisors, an independent broker that made nearly 90% of its loans to whites in 2015 and 2016.<\/p>\n
\u201cI\u2019m sorry,\u201d broker Angela Tobin wrote to Faroul in an email. Faroul\u2019s contract income wasn\u2019t consistent enough, she said. So Faroul got a full-time job at the University of Pennsylvania managing a million-dollar grant.<\/p>\n
But that still wasn\u2019t enough. When she tried again a year later, this time at Santander Bank, a Spanish firm with U.S. headquarters in Boston, the process dragged on for months. Her loan officer kept asking for new information, she said, or sometimes the same information again.<\/p>\n
By this time, Faroul had been trying to get a mortgage for over a year, and the process itself was damaging her credit. Every time a lender pulls a hard inquiry on a credit report, the score goes down to guard against people who are trying to take on a lot of debt.<\/p>\n
\u201cThey had done so many hard pulls that my credit score had dropped to 635,\u201d she said.<\/p>\n
Then, an unpaid $284 electric bill appeared on Faroul\u2019s credit report. It was for an apartment she didn\u2019t live in anymore. She paid the bill right away, but the bank said it couldn\u2019t move forward.<\/p>\n
Civil rights groups and real estate professionals said Faroul\u2019s experience follows a familiar pattern of discrimination by banks and mortgage lenders that has kept people of color from building wealth.<\/p>\n
\u201cIt\u2019s one thing after another. It\u2019s like pulling layers off an onion,\u201d said Arlene Wayns-Thomas, president of the Philadelphia chapter of the National Association of Real Estate Brokers, which represents African-American real estate professionals.<\/p>\n
Wayns-Thomas, who has been selling real estate for 30 years, said her black clients are treated differently by lenders.<\/p>\n
\u201cThey may not like what happened between the last time you were working on this particular job to this one. They may see there was a gap,\u201d she said. \u201cI have seen situations where they\u2019ve asked people for the children\u2019s birth records.\u201d<\/p>\n
\u201cThe things that happen behind the scenes is what\u2019s disturbing,\u201d she said.<\/p>\n
For Faroul, things suddenly took a turn for the better after her partner, Hanako Franz, agreed to sign on to her loan application. At the time, Franz \u2014 who is half white, half Japanese \u2014 was working part-time for a grocery store. Her most recent pay stub showed she was making $144.65 every two weeks. Faroul was paying for her health insurance.<\/p>\n
The loan officer had \u201ccompletely stopped answering Rachelle\u2019s phone calls, just ignored all of them,\u201d said Franz, 32. \u201cAnd then I called, and he answered almost immediately. And is so friendly.\u201d<\/p>\n
A few weeks later, the couple got the loan from Santander and bought a three-bedroom fixer-upper. But Faroul remains bitter.<\/p>\n
\u201cIt was humiliating,\u201d she said. \u201cI was made to feel like nothing that I was contributing was of value, like I didn\u2019t matter.\u201d<\/p>\n
Contacted by Reveal, the lenders defended their records. Tobin, who turned down Faroul on her first application, said race played no role in the rejection.<\/p>\n
\u201cThat\u2019s not what happened,\u201d she said and abruptly hung up. A statement followed from Philadelphia Mortgage Advisors\u2019 chief operating officer, Jill Quinn.<\/p>\n
\u201cWe treat every applicant equally,\u201d the statement said, \u201cand promote homeownership throughout our entire lending area.\u201d<\/p>\n
Faroul\u2019s loan officer at Santander, Dennis McNichol, referred Reveal to the company\u2019s public affairs wing, which issued a statement: \u201cWhile we are sympathetic with her situation, \u2026 we are confident that the loan application was managed fairly.\u201d<\/p>\n
Reveal\u2019s analysis of lending data shows that nationally, Santander turned away African-American homebuyers at nearly three times the rate of white ones. The company did not address that disparity in its statement but said it was more likely to grant a loan application from an African-American borrower than five of its competitors.<\/p>\n
Lending patterns in Philadelphia today resemble redlining maps drawn across the country by government officials in the 1930s, when lending discrimination was legal.<\/p>\n
Back then, surveyors with the federal Home Owners\u2019 Loan Corporation drew lines on maps and colored some neighborhoods red, deeming them \u201chazardous\u201d for bank lending. Leading causes of risk, according to government officials, included the presence of African-Americans or immigrants.<\/p>\n
This practice has been outlawed for half a century. And for the last 40 years, banks have had a legal obligation under the Community Reinvestment Act to solicit clients \u2014 borrowers and depositors \u2014 from all segments of their communities.<\/p>\n
But in many places, the law hasn\u2019t made much difference. When you combine home purchase loans, refinancing, and home equity lines of credit, banks were more likely to deny a conventional loan application than grant it in more than 40% of Philadelphia. People of color were the majority in nearly all those neighborhoods.<\/p>\n
\u201cYou\u2019re killing us here,\u201d said Cindy Bass, a member of the Philadelphia City Council, who worked for a mortgage company before entering politics. The data shows banks have frozen out borrowers in much of her district \u2014 including Nicetown, a North Philadelphia neighborhood where boarded-up row houses dot the landscape.<\/p>\n
\u201cWe need dollars. We need investment,\u201d Bass said, \u201clike every neighborhood needs investment.\u201d<\/p>\n
Nicetown is among the neighborhoods redlined in the 1930s. In his assessment, government surveyor W.R. Hutzel said the hazardous neighborhood had some positives, including \u201cnew industry \u2014 good transportation\u201d and a high school. On the other hand, he wrote, it had a \u201cheavy concentration of negro.\u201d<\/p>\n
Today, the economic recovery largely has bypassed Nicetown. Blight is a major concern. Some of the vacant homes, empty for years, have attracted squatters. Although it\u2019s just a few blocks from Temple University Hospital, banks and mortgage brokers largely stay away. Lenders have been particularly stingy when it comes to home improvement loans. From 2012 to 2016, they made 67 home improvement loans here and denied 315.<\/p>\n
\u201cIt creates this cycle where properties fall into dilapidation for a long period of time,\u201d said contractor Eric Marsh Sr., 48, whose family has lived in Nicetown for three generations.<\/p>\n
Marsh started his own construction business \u201cbecause I saw dilapidation and empty houses,\u201d he said, and he wanted to help. But because banks rarely lend here, there\u2019s no capital to improve the neighborhood. So Marsh gets most of his jobs in more affluent sections near the center of town.<\/p>\n
\u201cI was wondering why people weren\u2019t purchasing these houses or renovating them,\u201d he said. \u201cAs I\u2019ve gotten older and talked to people, I\u2019ve found out that a big part of it is the lack of lending in neighborhoods like this.\u201d<\/p>\n
It\u2019s not only historically redlined areas that suffer from a lack of credit. Some neighborhoods that were predominantly African-American decades ago have since gentrified and are now majority white. Today, they benefit from a large number of home mortgages from banks.<\/p>\n
Other neighborhoods that experienced white flight after World War II have become home to a substantial black middle class. And in those neighborhoods, banks are more likely to turn away borrowers.<\/p>\n
Four miles from Nicetown, toward the suburbs near the Awbury Arboretum, the homes of Germantown are set back from the street behind garden patios and beautiful stone facades.<\/p>\n
This area wasn\u2019t redlined in the 1930s. Government officials colored it green \u2014 \u201cthe best\u201d \u2014 and blue, which meant \u201cstill desirable,\u201d and told banks to lend here. Back then, most residents of Germantown were white.<\/p>\n
Today, this part of Philadelphia is majority African-American, and the homes are occupied by middle-class workers \u2014 teachers, nurses and union craftsmen. Yet in every year from 2012 to 2016, banks denied more conventional loans of all types than they made in Germantown.<\/p>\n
\u201cIt\u2019s like a glass ceiling,\u201d said Angela McIver, CEO of the Fair Housing Rights Center in Southeastern Pennsylvania. \u201cOK, we\u2019ll allow you to go this far, but \u2026 you\u2019re not going to go any further.\u201d<\/p>\n
<\/p>\n This story was originally published by Reveal from The Center for Investigative Reporting, a nonprofit news organization based in the San Francisco Bay Area. Learn more at revealnews.org and subscribe to the Reveal podcast, produced with PRX, at revealnews.org\/podcast.<\/p>\n Share image courtesy of Reveal. <\/p>\n <\/p>\n <\/em><\/p>\n","protected":false},"excerpt":{"rendered":" 50 years after the federal Fair Housing Act banned racial discrimination in lending, African-Americans and Latinos continue to be routinely denied conventional mortgage loans at rates far higher than their white counterparts. This modern-day redlining persisted in 61 metro areas even when controlling for applicants\u2019 income, loan amount, and neighborhood, according to a mountain of…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1090","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/posts\/1090","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1090"}],"version-history":[{"count":0,"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/posts\/1090\/revisions"}],"wp:attachment":[{"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1090"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1090"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}