Struggle for black and Latino mortgage applicants suggests modern-day redlining


JUDY WOODRUFF: It’s been 10 years since the
economic recession, and credit has slowly returned for most Americans. By 2016, the number of conventional mortgages
had risen 95 percent since the housing bust. And yet some Americans are still being left
behind. The gap between white and black homeownership
is wider now than it was in 1960. Tonight, the first of a two-part series, results
of a yearlong investigation from Reveal, a program produced by the Center for Investigative
Reporting. As Reveal’s Aaron Glantz reports, black and
Latino homebuyers in some cities seem to have a harder time getting a home mortgage. AARON GLANTZ: Brooklyn native Rachelle Faroul
moved to Philadelphia in 2015 hoping to buy a home here. RACHELLE FAROUL, Philadelphia Resident: I
was like, I’m going to try this thing. I have got a lot of gumption. AARON GLANTZ: She made a good income as a
computer programmer and had enough for a down payment. Her potential lender, Philadelphia Mortgage
Advisors, was encouraging at first. But the lender worried her income could be
unstable, since she was a contractor. So, Faroul suggested her mother co-sign. RACHELLE FAROUL: Because she is a retired
schoolteacher. Specifically, she worked in New York City
for 35 years. Her pension is great. AARON GLANTZ: But Faroul was told that wasn’t
enough to offset her mother’s student loan debt from a Ph.D. RACHELLE FAROUL: I got shot down left and
right. AARON GLANTZ: Lenders look for applicants
with debt payments roughly 36 percent or less of their income. So, Faroul got a new job with the University
of Pennsylvania with a salary allowing her to afford the two-story row house she found
a short walk from the university. RACHELLE FAROUL: I wanted this really badly. AARON GLANTZ: But that still wasn’t enough. When she applied for a loan again, this time
with Santander Bank, they also rejected her. Her credit score had plunged 50 points because
of a single delinquent electric bill. She paid the bill as soon as Santander flagged
it, but the bank still said no. Faroul started to suspect this had to do with
her race. RACHELLE FAROUL: You know, black people in
this country have to be twice as good to get half as much. And I couldn’t even get half, you know? They wouldn’t give me anything. AARON GLANTZ: Turning Faroul down because
of her race would be illegal. It’s been illegal for 50 years. LYNDON JOHNSON, Former President of the United
States: Fair housing for all in this country is now a part of the American way of life. AARON GLANTZ: The 1968 Fair Housing Act was
a response to redlining, a racist lending practice where the federal government colored
minority neighborhoods red on maps, labeling them hazardous to lend in. In 1977, President Carter went further with
the COMMUNITY REINVESTMENT ACT, requiring banks to lend to qualified borrowers in low-income
communities in cities where they had branches. But these laws have not solved the problem. After the 2008 recession, banks tightened
their lending standards. Ten years later, while lending has return
for many Americans, Reveal’s analysis shows what looks like modern-day redlining is showing
up across the country. EMMANUEL MARTINEZ, Reveal: We have places
like Washington, D.C., places like Tulsa, Oklahoma, Santa Fe, New Mexico. These are the places where they are more likely
to be denied because of who they are. AARON GLANTZ: Nearly 50 years after the Fair
Housing Act, Reveal data journalist Emmanuel Martinez found some significant racial disparities. EMMANUEL MARTINEZ: We looked at nearly 31
million mortgage records, nearly every loan application filed with the government in 2015
and 2016. In 61 metros across the country, applicants
of color are more likely to be denied a conventional mortgage. AARON GLANTZ: Banks don’t share credit scores. They say that is proprietary. But by using other information the government
requires be disclosed, Reveal found statistically significant differences by race. EMMANUEL MARTINEZ: My analysis includes nine
different factors. Among them are the applicant’s income, the
size of the loan, and specific information about the neighborhood that they are looking
to buy in. Here, we have the likelihood of denial. So, black applicants in Philadelphia are almost
three times as likely to be denied a conventional mortgage. AARON GLANTZ: Reveal found this pattern in
dozens of cities. Philadelphia was one of the largest. That means that a black applicant and a white
one with similar financial profiles will likely have very different outcomes. This wasn’t true for just for one bank, but
for the lending industry as a whole. The Mortgage Bankers Association wouldn’t
go on camera for this story, but in a statement, it said that the data available under the
Home Mortgage Disclosure Act is not sufficient to make a determination regarding fair lending. And the American Bankers Association said
that without access to borrowers’ credit history, the data cannot paint a complete picture. EMMANUEL MARTINEZ: Unfortunately, credit score
and an applicant’s total debt-to-income ratio aren’t part of this publicly available data
set, but it’s those same financial institutions that have lobbied from keeping it away from
researchers, from academics, from journalists like me, who want to study those disparities. SEN. TIM SCOTT (R), South Carolina: I believe that
we are better off having more information released in aggregate on credit scoring and
those folks who get loans to make sure that there is no discrimination. AARON GLANTZ: Republican Senator Tim Scott
of South Carolina says releasing that data would make the industry more transparent. But it wouldn’t solve a different problem. He says credit scores penalize people of color. He’s introduced a bill to fix that. SEN. TIM SCOTT: So what we’re trying to do is bring
to light all those folks who are paying those bills on time, and yet it’s not showing up
on their credit scores. Your electric bill, unless you’re doing something
bad, doesn’t show up. Your cell phone, unless you do something bad,
doesn’t show up. People of color are typically the folks who
will be disproportionately impacted. AARON GLANTZ: In almost every city in America,
African-Americans and Latinos were denied home loans at higher rates than whites. We could not statistically prove a relationship
between race and denial in many, but, in 61, including Philadelphia, our analysis found
race played a role. Neighborhoods with very few loans had the
highest proportion of black and Latino residents. ANGELA MCIVER, Fair Housing Association of
Southeastern Pennsylvania: You see, there are beautiful homes up here, and people work
very hard to maintain their properties. AARON GLANTZ: Angela McIver heads the Fair
Housing Association Of Southeastern Pennsylvania. In the era of redlining, the government shaded
this neighborhood, Germantown, blue and green, marking it as a desirable area to lend in. Over the decades, the demographics shifted
from white to black. And, today, banks deny more loans here than
they approve. You see beautiful stone facades. You see garden patios, all of the trappings
of middle-class life. And the banks are just MIA. ANGELA MCIVER: It’s like a glass ceiling. It’s like, OK, we will allow you to go this
far, but then you hit the top of the ceiling, you’re not going to go any further. And that’s upsetting to me. AARON GLANTZ: After Rachelle Faroul began
to wonder if race factored in her loan denial, she decided to use a new strategy. RACHELLE FAROUL: In order to be a be considered
a good applicant, I needed to have a white person or someone who’s white-adjacent vouch
for me. AARON GLANTZ: This time, she asked her girlfriend,
Hanako Franz, who is half-white and half-Japanese, to apply with her. Franz was working part-time at a grocery store. One of her most recent biweekly paychecks
was $162. And, at the time, your financial situation
was unstable. HANAKO FRANZ, Girlfriend of Rachelle Faroul:
Oh, yes, it was terrible. RACHELLE FAROUL: It was so bad. HANAKO FRANZ: It was terrible. I was borrowing money from my sister. Rachelle paid my health insurance at one point
because I didn’t have enough money to pay it. AARON GLANTZ: But, for Santander Bank, the
final lender Faroul tried, none of that seemed to matter. Franz had a good credit score. And once she came on board, it all went smoothly,
even though Franz couldn’t provide proof of a stable work history. HANAKO FRANZ: They were like, we need two
years. And I was just like, I can’t give that to
you. And they were like, all right, we will move
forward. RACHELLE FAROUL: Yes. AARON GLANTZ: We reached out to the two places
that Faroul approached for loans. Santander says that, while they sympathize
with Faroul, her loan application was managed fairly. Philadelphia Mortgage Advisors declined to
comment specifically on Faroul’s loan application. Both companies say they are committed to fair
lending and adhering to existing laws. The Treasury Department’s comptroller of the
currency is charged with ensuring major national banks follow the Community Reinvestment Act. Tom Curry held that job for five years under
President Obama and conducted more than 1,600 community lending reviews on banks. Nearly every one, 99 percent, got a satisfactory
or outstanding rating. How can everyone be getting this satisfactory
rating? THOMAS CURRY, Former Comptroller of the Currency:
I think you have to look at each individual bank and their individual record to see how
well they’re serving their communities. AARON GLANTZ: But Curry wouldn’t discuss any
individual banks or their records with us. Since stepping down as comptroller, he’s been
working at a law firm advising some of the same banks he regulated. He says he still wants make sure banks are
lending responsibly. THOMAS CURRY: You have an obligation to lend
in low- to moderate- income communities, but you have to do it in a safe and sound manner. AARON GLANTZ: Mobile, Alabama; Ocala, Florida;
Greenville, North Carolina, all of these cities where our statistical analysis shows the reason
you would be denied for a loan is the color of your skin. THOMAS CURRY: I think that the results from
your studies are not acceptable from the standpoint of what we want as a nation and to make sure
that everyone shares in economic prosperity. AARON GLANTZ: We also shared Reveal’s analysis
with Senator Scott. SEN. TIM SCOTT: Well, we certainly have made a
lot of progress over the last 50 years. The question is, is there more progress to
be made? The answer is yes. One of the ways you make progress is looking
at the current foundation on which progress has been made. And if it needs to be updated, we update it. AARON GLANTZ: Faroul and Franz closed on their
house a few weeks after Franz signed on. Last winter, they both started moving into
their new home. But with the good news, there is a reminder
of the barriers Faroul faced. RACHELLE FAROUL: I have a hard time telling
people that we bought a house, because their response is always, congratulations. This is not a feel-good story. HANAKO FRANZ: And the whole point about this
is that there is hidden privilege and hidden discrimination, you know, that still exists
and makes people’s lives harder every single day. AARON GLANTZ: Faroul says her biggest fear
is that, years from now, she will look around and be the only black person left on the block. For “PBS NewsHour,” this is Aaron Glantz in
Philadelphia. JUDY WOODRUFF: Tomorrow, our series with Reveal
continues with a report on how the gentrification of neighborhoods is making it difficult for
some longtime residents to take out home equity loans.

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