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As the Trump administration begins to gut federal enforcement of civil rights laws, minority communities that were targets for predatory home loans before the recession have become vulnerable yet again to mortgage discrimination. This time, many banks are simply writing off communities of color and denying them loans at all.
An alarming new study by the Center for Investigative Reporting’s online publication Reveal found that African-Americans and Latinos were far more likely to be denied conventional mortgages than whites even when income, loan size and other factors were taken into account. The study examined 31 million mortgage records and found disturbing evidence in 61 metropolitan areas, including Atlanta, Detroit, Philadelphia, St. Louis and San Antonio. African-Americans faced their worst obstacles in the South — Mobile, Ala.; Greenville, N.C.; and Gainesville, Fla. — and Latinos in Iowa City.
Black applicants were disproportionately turned away, as compared to whites, in 48 metropolitan areas, Latinos in 25, Asian-Americans in nine and Native Americans in three areas. In Washington, D.C., the study found that all four groups were far more likely to be denied home loans than were whites.
In Philadelphia, whites received 10 times as many conventional mortgage loans as African-Americans during 2015 and 2016, even though the two groups reside in the city in roughly equal numbers.
Banks have subverted the purpose of the Community Reinvestment Act of 1977, which was supposed to get them to lend and invest more, and open more branches, in low- and moderate-income areas. This was to correct decades of damage the federal government caused by encouraging lenders to ignore black areas until the passage of the federal Fair Housing Act in 1968. The Reveal study found that affordable mortgages issued in historically black neighborhoods to comply with the reinvestment act were going to white newcomers instead of longtime black residents. This has accelerated a pattern of gentrification that forces out black residents.
These problems are rampant throughout the United States. Three years ago, for example, a striking study commissioned by the city of Richmond, Va., found that black applicants were less likely to receive home purchase loans or refinance loans regardless of their incomes.
Upper-income black people were even more likely to be denied loans, as compared to similarly situated whites, than lower income black people were to their white counterparts. This underscored yet again that African-Americans cannot escape economic discrimination simply by becoming wealthier, especially when financial institutions persist in punishing them for living in majority minority neighborhoods. A destructive bill pending in the Senate would deepen this problem by exempting 85 percent of banks from reporting mortgage data that allows regulators and fair housing groups to ensure that home loans are being issued in a nondiscriminatory way.
By denying African-American families mortgage credit, the financial industry also denies them the opportunity to accumulate household wealth — part of the reason that white median family net worth is nearly 10 times that of black families. Beyond that, the decision to withhold credit from minority neighborhoods has turned too many of them into hollowed-out areas with high poverty, failing schools, lower property values and a markedly worse quality of life.
Not long ago, fair housing groups that uncovered particularly egregious lending discrimination by banks and mortgage companies could count on federal regulators to curb, at least, the worst forms of predation. But with the federal government rolling back enforcement, state attorneys general will need to band together the way they did to fight off predatory for-profit schools that saddled students with crushing debt for useless degrees.
Banks often claim that they deny mortgages in minority communities based on credit scores — but that claim is almost impossible to check, given that the credit scores are not publicly available. Beyond that, the credit scores used in the mortgage process work against minority applicants by not taking into account data on how reliably they pay rent, utility and cellphone bills. A bill pending in the Senate would open the door for the mortgage industry to use an alternative credit-scoring system, which would be one step in the right direction.
Opinion | The Race-Based Mortgage Penalty
An alarming new study by the Center for Investigative Reporting’s online publication Reveal found that African-Americans and Latinos were far more likely to be denied conventional mortgages than whites even when income, loan size and other factors were taken into account. The study examined 31 million mortgage records and found disturbing evidence in 61 metropolitan areas, including Atlanta, Detroit, Philadelphia, St. Louis and San Antonio. African-Americans faced their worst obstacles in the South — Mobile, Ala.; Greenville, N.C.; and Gainesville, Fla. — and Latinos in Iowa City.
Black applicants were disproportionately turned away, as compared to whites, in 48 metropolitan areas, Latinos in 25, Asian-Americans in nine and Native Americans in three areas. In Washington, D.C., the study found that all four groups were far more likely to be denied home loans than were whites.
In Philadelphia, whites received 10 times as many conventional mortgage loans as African-Americans during 2015 and 2016, even though the two groups reside in the city in roughly equal numbers.
Banks have subverted the purpose of the Community Reinvestment Act of 1977, which was supposed to get them to lend and invest more, and open more branches, in low- and moderate-income areas. This was to correct decades of damage the federal government caused by encouraging lenders to ignore black areas until the passage of the federal Fair Housing Act in 1968. The Reveal study found that affordable mortgages issued in historically black neighborhoods to comply with the reinvestment act were going to white newcomers instead of longtime black residents. This has accelerated a pattern of gentrification that forces out black residents.
These problems are rampant throughout the United States. Three years ago, for example, a striking study commissioned by the city of Richmond, Va., found that black applicants were less likely to receive home purchase loans or refinance loans regardless of their incomes.
Upper-income black people were even more likely to be denied loans, as compared to similarly situated whites, than lower income black people were to their white counterparts. This underscored yet again that African-Americans cannot escape economic discrimination simply by becoming wealthier, especially when financial institutions persist in punishing them for living in majority minority neighborhoods. A destructive bill pending in the Senate would deepen this problem by exempting 85 percent of banks from reporting mortgage data that allows regulators and fair housing groups to ensure that home loans are being issued in a nondiscriminatory way.
By denying African-American families mortgage credit, the financial industry also denies them the opportunity to accumulate household wealth — part of the reason that white median family net worth is nearly 10 times that of black families. Beyond that, the decision to withhold credit from minority neighborhoods has turned too many of them into hollowed-out areas with high poverty, failing schools, lower property values and a markedly worse quality of life.
Not long ago, fair housing groups that uncovered particularly egregious lending discrimination by banks and mortgage companies could count on federal regulators to curb, at least, the worst forms of predation. But with the federal government rolling back enforcement, state attorneys general will need to band together the way they did to fight off predatory for-profit schools that saddled students with crushing debt for useless degrees.
Banks often claim that they deny mortgages in minority communities based on credit scores — but that claim is almost impossible to check, given that the credit scores are not publicly available. Beyond that, the credit scores used in the mortgage process work against minority applicants by not taking into account data on how reliably they pay rent, utility and cellphone bills. A bill pending in the Senate would open the door for the mortgage industry to use an alternative credit-scoring system, which would be one step in the right direction.
Opinion | The Race-Based Mortgage Penalty
