Racial disparities in lending persist in Dayton, other areas
Modern-day redlining seen as huge barrier to creation of wealth.
DAYTON — Dayton is one of 61 metro areas in the U.S. where minorities are denied mortgage loans at higher rates than their white counterparts — a modern-day system of redlining that keeps minority neighborhoods from recovery, officials say.
“It makes it difficult if not impossible to build wealth,” said Jim McCarthy, president and CEO of the Miami Valley Fair Housing Center. “And it makes it near impossible for a neighborhood to turn around.”
In 2016, black applicants in the Dayton metro area were 2.1 times as likely to be denied a conventional home mortgage as white applicants, even when controlling for applicants’ income, loan amount and neighborhood, according to data analysis by Reveal, the online platform of The Center for Investigative Reporting.
Lenders say there is no
intentional discrimination taking place and the data doesn’t account for criteria such as credit scores, which banks consider when making loan decisions. Individual credit scores are not releasable to the public.
Local fair housing advocates say lending industry practices keep African-Americans from homeownership and keep neighborhoods from improving.
This happens in a variety of ways, experts say: from a lack of bank branches in majority-black communities and products not being marketed there, to low-ball appraisals of homes. The federal government has alleged in lawsuits that certain lending policies can amount to redlining even if they are not intentional.
Locally, the result is large swaths of West Dayton and Trotwood where very few people even apply for mortgage loans and more than half of those who do get rejected.
The inability to get credit for homes in these neighborhoods leaves them vulnerable to foreclosures and blight.
It means people such as Wanda Dean can’t sell properties that they’ve kept up and even poured money into renovating, because they live in the wrong census tract.
“It’s very disheartening,” Dean said. “I had worked hard to try and keep my property up.”
She had a recent offer to buy her duplex on East Parkwood Drive for $95,000. But an appraiser said the property was only worth $40,000, which frightened the potential buyer.
Her real estate broker, Veronica Bedell-Nevels, said the appraiser wasn’t willing to look at comparable homes outside the immediate neigh- borhood, which has a number of rundown properties in sharp contrast to Dean’s neatly kept yard and reno- vated two-bedroom units.
“It was just unfair to me, because the city doesn’t even appraise it that low,” Dean said.
The home is in census tract 11, which runs between North Main Street and Riverside Drive in Dayton’s Riverdale and North Riverdale neighborhoods. The population is 61 percent black, and lenders turned down 57 percent of applicants for loans there in 2016.
“If there is no mortgage lending happening in neighborhoods, how do you stabilize neighborhoods?” said Catherine Crosby, executive director of the Dayton Human Relations Council. “We know that homeowner- ship creates a sense of pride.”
Redlining not in past
In the 1930s, surveyors with the federal Home Owners’ Loan Corporation drew lines on maps and used the color red for some neighbor- hoods, deeming them “haz- ardous” for bank lending because of the presence of African-Americans or European immigrants, especially Jews.
Redlining has been outlawed since 1968. And for the last 40 years, banks have had a legal obligation to solicit clients — borrowers and depos- itors — from all segments of their communities.
But in many places, the data shows the law hasn’t made much difference.
The analysis - inde- pendently reviewed and confirmed by The Associated applicants Press were - showed turned black away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three.
The yearlong analysis, based on 31 million Home Mortgage Disclosure Act records, relied on techniques used ics, the Department the by Federal leading Reserve of academ- Justice and to identify lending disparities.
The analysis included all records publicly available covering nearly every time an American tried to buy a home with a conventional mortgage in 2015 and 2016. Federal Housing Adminis- tration not included, (FHA) but loans disparities were statistically similar, Reveal said.
It controlled for nine eco- nomic and social factors, including an applicant’s income, the amount of the loan, the ratio of the size of the loan to the applicant’s incom e a nd the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property.
It found a pattern of troubling denials for people of color across the country, including in major metropolitan areas such as Atlanta, Detroit, Philadelphia, St. Louis and San Antonio.
Dayton was the only city in Ohio where a significant racial disparity in lending was identified.
It’s a story that has been playing out here for decades, fair housing advocates said.
“The city refuses to come west,” said Mary Jo Wiley, president of the Great Dayton Realtist Association, an African-American trade orga- nization of real estate agents and brokers whose mission is to serve the under-served. “All of the things river on suffer.” the west side The racial discrepancies in lending and the neighbor- hoods that suffer most haven’t changed much in the eight ton Daily years News since last the analyzed HMDA data. Then too, black applicants were twice as likely to be turned down for loans. Some of the neighborhoods that had in even the worse worst loan shape rates today. are The census tract that encompasses much of the Westwood neighborhood had 38 out of 44 loan appli- cations then, more denied than in 2008. 200 homes Since there have been demolished by the city under nuisance abatement laws. There were only six applications for home loans in 2016 and a third were denied.
‘Industry has failed’
Enforcement under the CRA, Fair Housing Act and other fair lending laws has been sparse, but was bolstered by a 2015 Supreme Court decision that said lend- ing to — a have practices discriminatory a “disparate could be impact” effect found — even if it wasn’t motivated by an intent to discriminate. The Justice Department sued a handful of financial institutions for failing to lend to people of color each year under the Obama adminis- tration. During President Donald Trump’s first year in office, the department did not sue any lenders for racial discrimination. Union Savings Bank and Guardian Savings Bank, which share owners and have headquarters in Cincinnati and West Chester Twp. respectively, were accused by the DO J in 2016 of redlining in Cincinnati, Dayton, Columbus and Indianapolis. The government’s complaint alleged that Union Savings — which is the largest lender by volume in the Dayton market — located all its branches in predominantly white suburbs of Dayton and only marketed their products there. It also alleges the bank trained loan officers to avoid majority black neighborhoods, and knew of, but failed to address, significant racial disparity in its lending compared with other banks in the market. The bank “engaged in a pattern or practice of unlawful business redlining so by structuring as to avoid the credit needs of majority-black neighborhoods,” and, “discouraged applicants in these neighborhoods from applying for credit,” according to the complaint. The entire banking industry has failed to properly address this disparity, said Keith Borders, vice president of community development for Union Savings and Guardian Savings banks. Under a consent order, the banks agreed to provide training to employees, conduct a credit-needs assessment of the majority-black census tracts they serve and come up with products to meet those needs, open new branches in minority neighborhoods, develop community partnerships and donate at least $750,000 to groups promoting homeownership. The needs assessment that was performed in the Dayton area led to the development of a new home improvement loan not previously available. The $5,000 forgivable loan comes with a requirement that borrowers get financial education training. In 2017 the bank awarded about $500,000 in credit through that program. They’ve also donated $20,000 to groups like Habitat for Humanity and the Homeownership Center Dayton, Borders said. The banks also partnered
with Central State University to create a Summer Banking Institute, aimed at getting minority students inter- ested in careers in banking.
“There isn’t enough diversity,” Borders said. “How do you begin to build the trust?”
Several other banks that serve Dayton have community redevelopment programs flexible that loan seek products to offer and partner with non-profits to increase homeownership.
Some lenders have shifted to get rid of minimum loan limits and commissions based on loan values, Crosby said, ficial which because has the been average bene- home price in some neigh- borhoods is $40,000 to $50,000.
“There was no incentive to make loans at that lower value,” she said. Lenders and their trade organizations have raised questions about the reliabil- ity of Reveal’s analysis, saying any meaningful review of mortgage lending practices cannot be based on statistics alone but must consider the most important factors in the decision to lend. Those are a borrower’s credit score and history, their income and debt-to-income and loan-to-value ratios. “Unfortunately, that some- times means hardworking Americans seeking a mortgage may not qualify under current rules,” a statement from the American Bankers Association said. “The banking industry remains com- mitted to working with pol- icymakers to ensure those borrowers eventually get the opportunity to obtain a mortgage appropriate for them.”
The same statement said HMDA data can only determine if a disparity exists, not why it exists.
To those working to improve homeownership in Dayton there is no question of the disparity, and that lending policies and regulations are fueling it.
“No one who wants to live in a certain neighborhood has any decent credit?” McCarthy with the Miami Valley Fair Housing Center said. “We find that difficult to believe.”