Starting in the 1930s, the Federal Housing Administration practiced a policy called redlining, which permitted banks to deny loans to particular neighborhoods based on their racial or ethnic composition. That practice has been illegal since 1968, but African-Americans and Latinos continue to be denied mortgage loans at rates far higher than their white counterparts, according to new reporting from Reveal from The Center for Investigative Reporting.
Data from millions of records showed that even when controlling for applicants’ income, neighborhood and proposed loan amount, people of color were disproportionately likely to be turned down. Host Frank Stasio talks with reporter Aaron Glantz about the connection between the racial wealth gap and home ownership. They also explore the failed impact of federal policies like the Community Reinvestment Act, which was intended to undo the damage of redlining, but instead has contributed to gentrification. Glantz is a senior reporter at Reveal from The Center for Investigative Reporting and PRX and the co-reporter of the investigation “Kept Out.”
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On consistent discriminatory lending practices around the country:
We went through 31 million records ... We looked at how much money people made, the neighborhood they wanted to buy in, the amount of debt that they were trying to take on in terms of a loan. And we found there were 61 cities – including three in North Carolina: Greensboro, Rocky Mount and Greenville – where even if you made the same amount of money, and you were trying to buy in the same neighborhood, and you were trying to take out the same size loan, you were more likely to be turned down if you were African-American, Latino, Asian or Native American. And in fact Greenville had the biggest disparity in the entire country. If you were black in Greenville and trying to buy a house, you were more than five times as likely as a white person ... To get rejected.
On the results from a deep dive into lending practices in Philadelphia:
Nobody is as perfect as the banks would like us to be. We all have gaps in our employment, or we have cell phone bills that we forgot to pay, or parking tickets that went to collection. Life intervenes for all of us. And what we found was that when life intervened for a person of color, it was more likely to hurt them with a loan officer than if the person was white ... The disparity is between people of color who have issues and white people who want to buy the same sort of home that also have imperfections in their credit history.
On why credit scores are not a neutral metric:
The main push back we're getting from lenders is we didn't have this credit score information. And the reason we didn't have it, by the way, is that the banks have been fighting against releasing it ... Credit score itself is seen by many as discriminatory ... It has to do with the way the algorithm works, and there are certain things, like payday loans – where people of color are targeted for payday loans – that only report if you miss a payment. So, for example, on a traditional car loan, every time you make a car payment your credit score goes up. So if you miss a payment, and it gets knocked down, you have all those other payments that jack it back up again. But on other things, like payday loans, or rent ... It only reports if you miss it ... We found that people of color who behave basically the same way as whites ... Are more likely to have a negative credit score just because of the way the algorithm is calculated.