Following are comments made by CACLV’s Alan Jennings at a press conference to discuss fair mortgage lending in this market. The press briefing took place on February 16, 2018.
MORTGAGE LENDING DISPARITY
16 FEBRUARY 2018
In the late 1980’s, Bill Dedman, a reporter with the Atlanta Journal-Constitution, won a Pulitzer Prize when he shook up the banking industry with an explosive expose of mortgage lending disparities in the United States. His series revealed that our banking system was denying mortgages to African-American and Latino borrowers at a rate that was far higher than their white counterparts.
The story led us to do the research in our own market, made possible by the Home Mortgage Disclosure Act, a 50-year-old federal law that requires mortgage lenders to collect and publicly disclose the number of mortgages they deny or approve by income, by census tract, by race/ethnicity and by gender.
We found similar disparities here – banks rejecting people of color at rates that were three to five times higher than their white counterparts.
What was worse was how few applications banks were even taking from minority prospective homebuyers. Some banks would go an entire year without taking an application from a person of color. From our perspective, few applied because few expected to be approved.
Banks in this market, few of which still exist today, had largely been able to skirt the Community Reinvestment Act because, in those days, few were paying attention. It got my attention.
We provided the data to The Morning Call, which ran a story that was more than two full pages. It embarrassed the most staid institutions in our community. It also ushered in a new era. Banks had no choice but to acknowledge their problems with color and work with us to address the issue.
Together, banks and community development groups created a series of initiatives:
We created the Homeownership Counseling Program, which conducted seminars on how to buy a home for people we recruited from street-level outreach efforts. And the region’s banks funded it.
But before we got it going, we asked the banks to set up an internal peer review process so that any rejected mortgage would be scrutinized by a second underwriter to guard against one rogue decision-maker using the wrong reason to reject a borrower.
Then we went one step further; we created a peer review process among the banks. Every other week, banks would bring applications they planned to deny. The bank would be challenged by its peers on the decision to reject. If the originating bank stuck to its decision, the other lenders at the table could take the loan off the originating bank’s hands. All of this was under the watchful eyes of and administered by Neighborhood Housing Service. The banks worked hard to approve their applications to avoid losing business. Within months, the banks had nearly wiped out the likelihood of a bankable borrower being rejected. The effort paid off. Within four years, the disparity was dramatically reduced; people of color were just 30% more likely to get news they didn’t want to hear.
Over the years, while local banks were becoming regional banks through acquisitions and mergers, we made sure that those new institutions understood the culture of their new market.
It is a culture that said, “Welcome. We want you to make money here. But we want you to extend credit to our families and their neighborhoods, regardless of income, regardless of color.” It was exciting to see banks competing for the opportunity to make loans to lower-income customers and people of color.
With each merger, the region’s community, housing and economic development groups would invite the top executives of the acquiring bank to meetings where we made it clear that there was a price to enter this market: fair lending, even affirmative lending, in every neighborhood, to every prospective borrower, regardless of where they lived or what they looked like.
We pressed banks to offer special mortgage products to lower-income borrowers; we pressed them to hire more originators who looked like their customers, underwriters who understood the market; we pressed them to advertise in Spanish; we pressed them to fund the nonprofits, like ours, that could deliver bankable minority and lower-income borrowers to the lenders. For CACLV’s part, our homeownership seminars CACLV are offered 7 times each year. Our average attendance is more than 50 people who dream that American Dream; two-thirds are African-American or Latino. Over these past 25 years, we have helped, at the very least, 150 minority families buy their first homes each year – easily, 4,000 homebuyers, literally changing the complexion of homeownership in the Lehigh Valley. And, as far as we can tell, almost all survived the foreclosure crisis born of predatory lending in the early years of this millennium.
So, when a new group, the Center for Investigative Research did a study of lending data, released earlier this week, showing new evidence of disparate mortgage lending in 60 markets across the country, the Lehigh Valley was not on the list.
Instead, we found these 6 words: The study “didn’t find clear evidence of discrimination” in this market.
What a remarkable affirmation of the power of partnerships, when a community can collectively agree that it will not leave anyone behind!
Most banks in this market have African-American or Latino originators, with names like Myrta Rodriguez and Celia Alvarado at BB&T, Juan Del Luna at Wells Fargo, Lillian Shelly and Rebecca Newsom at Lafayette Ambassador Bank, Cheryl Davis at Bank of America, Eli Betancourt at Quaint Oak, Abby Torres at Santander and Francie Cook and Joanna Aguilo at TD Bank; certainly they are not going to discriminate against their neighbors, friends and family members.
Most banks in this market recognize that African-American and Latino borrowers are the emerging market; because of everyday experiences being victims of discrimination throughout their lives, these borrowers become loyal customers of the businesses that treat them right and give them the same respect they give any other customer. It won’t be long before these customers are the majority and the new face of America’s minority population will look like mine. Any bank that doesn’t return their calls will be in trouble when that time comes.
Every bank in this market understands that it can’t make money if it doesn’t make loans.
And no bank wants a reputation for turning its back on any class of customer, because the world is watching: regulators, advocates, urban municipal officials, reporters.
Banks are the primary financial supporters of every loan program, every homeownership seminar, every initiative that extends credit where it is needed; they back their financial resources with volunteer support; some have practically begged me to produce borrowers for them.
Don’t get me wrong, the LV has a race problem. And no discrimination is acceptable. But we have become very sophisticated in how we discriminate: large lot size requirements in suburban land use policies; public education policies that ensure that those districts with the biggest homes have the most money to spend on their kids’ education; a corrections system that corrects nothing; Realtors who, for years, steered buyers in blatant violation of fair housing laws.
If one is looking for an explanation of any lending disparity that might exist, just look at income disparity:
In Lehigh County, 30% of Latinos and 26% of African-Americans are poor, while fewer than 7% of whites are poor.
In Northampton County, 17% of African-Americans and 24% of Latinos are poor while 8% of whites are.
The median income in the Lehigh Valley is about $65,000, while the median income for African Americans is close to $45,000; for Latinos it is less than $40,000.
Those numbers should be everyone’s concern.
Here in the Lehigh Valley, people of color are far too likely to be poor relative to their white counterparts, they are far more likely to go to schools that struggle to teach, far too likely to miss the opportunity to go to college, and when they complain, far too many people turn a blind eye, a deaf ear, a cold heart.
Stories that reinforce their other experiences with discrimination can be the determining factor in whether a person of color will try anyway. I want to be clear today: to each and every person of color who yearns to own their own home: get your credit score right, save a little money, take our homeownership seminar and look for a home you can afford. When you do, take advantage of the good work done by community-based organizations and the banks in this community who are anxious to help you help us make this community the best it can be and contact any of us.
We’re all open for business.