A stunning new investigation by Reveal and The Center for Investigative Reporting has uncovered evidence that African Americans and Latinos continue to be routinely denied conventional mortgage loans even at rates far higher than their white counterparts across the country. According to the piece, the homeownership gap between whites and African Americans is now wider than it was during the Jim Crow era. Reveal based its report on a review of 31 million mortgage records filed with the federal government in 2015 and 2016. The investigation found the redlining occurring across the country, including in Washington, D.C., Atlanta, Detroit, Philadelphia, St. Louis, and San Antonio, Texas.
the Philadelphia City Council has passed a motion for oversight hearings, and community groups in redlined neighborhoods have begun organizing to pressure culpable banks to end their racially discriminatory practices.
All this comes as a bipartisan group of lawmakers on Capitol Hill is moving to gut provisions of the Dodd-Frank financial reform bill enacted after the 2008 financial crisis. The bill forces banks and credit unions to disclose to the government detailed information about who they lend to. The ranking Democrat on the Senate Banking Committee, Senator Sherrod Brown of Ohio, has cited _Reveal_’s reporting as a reason for Congress to put the brakes on this effort.
Aaron Glantz talking:
We wanted to know why it was, as you mentioned in your intro, that even though segregation and housing discrimination has been illegal for 50 years, that the homeownership gap between blacks and whites in America is now greater than it was during the Jim Crow era. So, we analyzed 31 million mortgage records. My colleague Emmanuel Martinez went through virtually every mortgage application that was made in the United States in 2015 and 2016, using data available under the Home Mortgage Disclosure Act. And we controlled for how much money a person made and the neighborhood they wanted to buy in and the size of the loan they wanted to take on and six other social and economic factors that might play into whether or not a person would get a mortgage, whether or not a person would be able to buy a home.
And we found that in 61 cities across the country, including Philadelphia, St. Louis, Detroit, San Antonio, Orlando, Gainesville, Washington, D.C., in all of these cities around the country, people of color were more likely to be denied a conventional home purchase loan, even when they made the same amount of money as their white counterparts, even when they wanted to buy in the same neighborhood as their white counterparts, and even when they wanted to take on the same size loan as their white counterparts.
Sen. Vincent Hughes talking:
I think what we have to do is look at this directly, from the great reporting that Reveal did, and understand the ripple effect that comes when you have this kind of discrimination going on. For example, Philadelphia has the largest poverty rate of any major city in the nation, 26 percent—largest deep poverty rate of any city in the nation. The ripple effect on housing stock, we’ve got 15,000 vacant houses. The ripple effect on wealth and across the board. And broader policy, the ripple effect on education funding, because now, because of this problem, we don’t have the capacity to provide local dollars to a state that’s not doing what it’s supposed to do in terms of funding basic education in Pennsylvania. So, what we’re talking about specifically around the discrimination piece, but then we have to broaden the lens to see how this plays itself out across the board on a number of other public policy matters. And it is an extremely, very, very serious problem.
Aaron Glantz talking:
back in the 1930s, there were employees of the federal government in the Home Owners’ Loan Corporation, went out into cities. They drew lines on maps. They said certain neighborhoods were “hazardous” to lending—that was their word—because they were threatened by Negroes or infiltrated by Negroes or infiltrated by foreigners, and that’s why they told banks to stay away back in the 1930s. Fast-forward to the 1960s, all that becomes illegal. And yet here we are, many generations later, and we’re seeing some of the same results.
And I should add, we looked at those old redlining maps in Philadelphia and other cities. And we found that there were some neighborhoods that were redlined back in the day that still couldn’t get loans. But then we found something else that I found, frankly, even more disturbing: that there were neighborhoods that were redlined back in the day that now were getting loans, but only to white gentrifying newcomers. And then there were other neighborhoods in Philadelphia that were middle-class, African-American neighborhoods, where people made good money working union or other middle-class jobs, and just wanted to get a nice home improvement loan to keep up their property or refinance their debt so they could have a comfortable retirement, and the banks there were saying no, as well. And those were neighborhoods, some of them, that back in the 1930s were colored blue or green. They were deemed best or desirable by the Home Owners’ Loan Corporation. Back then, they were white neighborhoods. We found that if a neighborhood, over time, had gone from a predominantly white neighborhood to now being a majority people of color neighborhood, that those neighborhoods, as well, now faced denial today.
I think that when we hear a story like Adrienne Stokes’, the reason that we wanted to bring her story to a national audience was because she lives in this neighborhood in Philadelphia called Point Breeze, which is a historically African-American neighborhood, which is seeing a tremendous influx of wealthy white newcomers—so, gentrification. And I wanted to know: Why is it that when communities gentrify, when new money comes in, when blighted and vacant properties are occupied, that the existing residents there don’t feel lifted up, that they don’t feel personally improved, that instead they feel pushed out?
And so, you know, in Adrienne’s case, her house was suddenly worth a lot more. And she said, “You know what? Now I want to fix it up. Now I want to fix that broken sump pump. I want to fix my circuit breaker. I want to fix my windows.” And she goes to her local bank, the only one in the neighborhood. They say no. Her local bank, First Trust, which is a local Pennsylvania institution, helped more than 500 people in Philadelphia buy homes over the last five years, and only a small fraction of them, less than two dozen, were African-American. We see that with many institutions. And many institutions, nearly all of them, 99 percent, under President Obama, got a satisfactory or outstanding grade under the Community Reinvestment Act, which is a landmark law signed in 1977 by Jimmy Carter to try to get banks to lend in low-income communities. And what we found was that these institutions were exploiting, in a loophole in the law that did not anticipate a gentrification. And so, nearly every one of them was getting a passing grade.
Then, let’s fast-forward. So, all that data, all those inspections, all the mortgage records we reviewed, all related to the Obama administration. Now we have, to your question, President Trump in office. The person who has the position now as comptroller of the currency, basically the nation’s top bank cop, Joseph Otting, who is charged with enforcing the Community Reinvestment Act, he ran a bank called OneWest with Steve Mnuchin, who is now Trump’s treasury secretary. And for the five years that he was in charge of OneWest, which was one of the largest banks headquartered in Southern California, they helped exactly three African Americans buy homes, and just 11 Latinos. And he is now in charge of enforcing these laws designed to get banks to serve low-income people across the country.
we looked at all the data that is publicly available under the Home Mortgage Disclosure Act, which included how much money people made, the neighborhood they wanted to buy in and the amount of loan, the amount of house they wanted to buy, the amount of debt they wanted to take on. And we included a lot of other factors, too, like the demographics of the neighborhood, and the regulating agency over the financial institution where they were trying to the loan, and everything we could.
There were some things that we couldn’t include, because the banks have been fighting to keep them secret. And one of them was credit score. Another really important metric that we couldn’t use was debt-to-income ratio, like the amount of debt total that a person has, including their student loans, their car payments, etc., in addition to the loan they’re trying to take on, in relationship to their income. And the reason that we couldn’t include that information, that we wanted to include, was because the banks, since the Dodd-Frank Act was passed in 2010, have been fighting to keep that information secret. So, global economy crashed because of bad loans. Congress and President Obama said, “Banks, you have to start giving the public and the government information about borrowers’ credit scores, their overall debt burden and other factors.” And the banks have been kicking and screaming for seven years now, and we still don’t have it.
So, here we come, at The Center for Investigative Reporting. We go through all the records that’s publicly available. And then the banks say our analysis, that shows people of color can’t get a loan even when they make the same amount of money as whites, is no good because we don’t include the very information that they’re trying to keep secret, and that they have successfully kept secret up until this point.
Sen. Vincent Hughes talking:
about accessing credit score information and what have you and what makes the practices of the banks really suspect. You know, most of us do a lot of our banking online now. We’re facile enough to move around online to do our banking. But it is interesting, if that is a reality, that three-quarters of all of the bank branches that still are in existence in the city of Philadelphia are in majority-white neighborhoods, even though most folks are doing their banking online now. So, they’re discriminating in the mortgages that they’re approving, and they’re discriminating in where they’re locating their local branches, and they’re not placing local branches in minority—in majority-African-American and -Latino neighborhoods. So, that’s one thing, which causes the banks’ behavior to be really suspect here.
In terms of what we can do as—at the state level, we’ve got to figure out what power that we have that we can put on these federal—federally chartered institutions. Most of the banks that we’re talking about are federally chartered. I think, you know, for example, the city of Philadelphia has filed a lawsuit against Wells Fargo for steering—Wells Fargo for steering folks, minority communities, African-American and Latino communities and individuals, to higher-interest, higher-risk mortgages. So, it’s my understanding that Wells Fargo, while dealing with this lawsuit, has put aside maybe $3.2 billion, $3.25 billion, anticipating what potentially could happen if the courts rule against them. You know, driving dollars—if we’re successful on the legal front, if we’re successful in terms of public pressure, if we’re successful in saying, “You know what? State tax dollars should not go to banks that are racially discriminating. They should go to banks that are supporting and engaged in diverse communities, in African-American and Latino communities. Let’s move our state dollars into those institutions. Then maybe we can drive more activity, more mortgage lending, more favorable mortgage lending, into African-American and Latino communities, and the banks have got to pay.”
Again, the ripple effect of this kind of behavior is far-reaching, far-reaching. Ninety percent of the homes in the city of Philadelphia are older than 1978. And that’s important because 1978 was the year that lead paint was outlawed, was ruled you cannot use lead paint in terms of—because of the lead content. Well, we’ve got communities—we’ve got communities, especially black and brown communities, African-American and Latino communities, who are living in lead-filled homes. And so, they’re living in toxic households. If you can’t get a mortgage or you can’t get a second on your home to make home improvements to get rid of that lead, then you’re living in, if you will, houses of hell, OK? Because of the toxicity rate is so high.
Folks need to be criminally gone after. We need to move our money out of those institutions into institutions that are more favorable to these communities, who are not—who are not involved in discriminatory and racist behavior. And they need to be sent a message. We cannot depend upon Washington, D.C., at the federal level, given what they’re doing. We’ve got to take this within our own hands. Legislators around the country need to go after this. Local councilpeople and mayors around the country need to go after this and demand the justice that these communities deserve. It’s right morally, but it’s also good investment policy for these local communities.
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Aaron Glantz
senior reporter at Reveal from The Center for Investigative Reporting. His new investigation is headlined “Kept out: How banks block people of color from homeownership.”
Vincent Hughes
Democratic state senator of Pennsylvania. He serves as the Democratic chair of the Senate Appropriations Committee.
— source democracynow.org