Posted on Tuesday, May 18, 2010
While the financial crisis led to significantly reduced access to mortgage credit for all borrowers, communities of color were hit the hardest by the dramatic decrease in low-cost home loans, according to a report released Thursday by a multi-state collaboration of regional research, policy, and advocacy organizations
The report, Paying More for the American Dream IV, examined the mortgage lending patterns of banks, including the nation’s four largest financial institutions, in seven metropolitan areas in the United States: Boston; Charlotte, North Carolina; Chicago; Cleveland; Los Angeles; New York City; and Rochester, New York.
Using data from 2006 to 2008, the report found that prime mortgage lending in communities of color declined more than twice as much as it did in predominantly white communities. According to the report, neighborhoods where people of color comprised 80 percent or more of the residents experienced a 60.3 percent decrease in lending, compared to a 28.4 percent drop in lending in white neighborhoods, where people of color comprised less that 10 percent of the residents.
The report also found that the drop in prime lending for neighborhoods of color was even steeper for refinance loans that allow borrowers to take advantage of lower interest rates or access home equity. Such lending declined by 66.4 percent in neighborhoods of color, but fell just 13.9
percent in white neighborhoods, the report said. In addition, findings of the report showed that the overall share of prime refinance loans made in communities of color dropped 35 percent, whereas the share of these loans made in predominantly white communities increased 11 percent.
According to the report, similar lending patterns were demonstrated by Bank of America, Citibank, JPMorgan Chase, and Wells Fargo – the nation’s four largest banks. The report found that between 2006 and 2008, prime refinance lending by these four banks increased by 32.2 percent in white communities but decreased in neighborhoods of color by 33.1 percent.
“After inflicting harm on neighborhoods of color through years of problematic subprime and option adjustable-rate mortgage loans, banks are now pulling back at a time when communities are most in need of responsible loans and investment,” said Geoff Smith, SVP of the Woodstock Institute, one of the seven organizations who compiled the report. “We are concerned that we have gone from a period of reverse redlining, to a period of re-redlining.”
The report made numerous recommendations for resolving these issues, including creating a strong, independent Consumer Financial Protection Agency, expanding the Community Reinvestment Act to promote responsible lending and investment, and expanding Home Mortgage Disclosure Act data to shed light on discriminatory practices. In addition, the reported recommended prioritizing fair lending enforcement, stopping preventable foreclosures, and requiring banks to fund revitalization of damaged neighborhoods.
Paying More for the American Dream IV is the fourth annual report in the Paying More for the American Dream series, a collaborative effort of the California Reinvestment Coalition, Community Reinvestment Association of North Carolina, Empire Justice Center, Massachusetts Affordable Housing Alliance, Neighborhood Economic Development Advocacy Project, Ohio Fair Lending Coalition, and Woodstock Institute.-DSNews