Counterpoint: Race does matter in mortgage lending
Data disputes color-blind housing claim
Owning a home has been the cornerstone of the American dream — but a dream rooted in a history of inequity.
The premise of a recent column by Trey Garrison (“Housing shouldn’t look at any color but the color of money,” August 29) claimed that “borrowers aren’t turned down because of the color of their skin”; but rather because of two objective measures: “money for down payment and credit scores.”
This claim is disingenuous and dangerously misleading.
The color of one’s skin has hindered many people of color from fair participation in homeownership. Historic, systematic, and persistent legacies of discrimination in the housing industry have been well-documented (and are still written about, as in the recently buzzed about Atlantic article by Ta-Nehisi Coates “The Case for Reparations”).
Consider for example the most recent Home Mortgage Disclosure Act data. In 2012, there were 1.3 million conventional mortgage loans made; of those, Latinos received only 69,217 loans, African-Americans received 29,405 loans, and Asian American Pacific Islanders received 2,697 loans. There were 4.9 million refinance loans made in 2012, of which Latinos received 76,038, African-Americans received 75,785, and Asian American Pacific Islanders received 10,611.
But if the numbers aren’t enough, the empirical evidence is also damning.
On Sept. 2, Eric T. Schneiderman, New York’s Attorney General, filed a lawsuit against Evans Bank, N.A. and Evans Bancorp, Inc. for their failure to make mortgages available in Buffalo’s largely African-American East Side neighborhoods. Alleging that Evans automatically disqualified East Side residents – regardless of their creditworthiness – is just the latest legal challenge involving redlining – a practice of exclusion that stretches as far back as the beginning of the 20th century.
The Center for Responsible Lending’s own independent research on mortgage lending consistently demonstrates that race matters in mortgage lending. Starting in 2006, data illustrated that African-Americans and Latinos were 30% more likely to receive subprime loans than similarly-situated white borrowers. Later research in 2008 demonstrated that, during the height of the housing crisis, African-Americans and Latinos were specifically targeted for subprime loans with more risky features even when they qualified for lower-priced, safer mortgages.
Thus in 2011, it was not surprising at all that the data showed that borrowers of color were twice as likely to lose their homes through foreclosure as white borrowers. These higher rates were due to the risky mortgage loans that borrowers of color had been steered into, even after accounting for income and credit history. A related CRL report in 2013 found that over half of the $2.2 trillion in property values lost as a result of the nation’s foreclosure crisis was borne by communities of color.
Ironically, research shows that lower-wealth borrowers with smaller down payments who received well-underwritten loans during this same period accumulated on average $18,000 in home equity.
Today, families of color do not have comparable levels of wealth with whites because they were denied the same chance to create wealth through the building of home equity. Also, families of color were targeted with abusive loan practices that stripped the wealth built up after increases in mortgage lending following the enactment of the Community Reinvestment Act in 1977.
White Americans are more strongly situated to pass on intergenerational wealth because mortgage lending policies and practices favored them to the exclusion of others. Thus, white Americans have an ability to have larger down payments and stronger credit profiles.
In the aftermath of the greatest recession since the 1930s, homeownership remains an important building block to building financial wealth and the later transfer of wealth to younger family generations. This recent and disproportionate loss of wealth from the housing crisis exacerbates the historical racial differences in the American Dream of homeownership and the ever-widening wealth gap.
Harvard’s Joint Center on Housing estimates that seven out of 10 future homebuyers will be comprised of people of color. The current housing finance system’s failure of providing conventional mortgages to borrowers of color will have serious consequences on a healthy market and overall economy.
Forty-six years following the enactment of the nation’s Fair Housing Act, lenders and other housing industry stakeholders still fail to comply with this important law. To deny people of color access to mortgage credit and the resulting opportunity to build wealth is truly un-American.