Most Americans think of racism as limited to interactions between people—in which one person targets another because of the color of their skin. Every once and a while, folks will also admit that racial hate groups exist, though there is widespread denial about how many of them are actually out there. But, collectively, we still can’t seem to wrap our heads around how institutions, policies and processes create and perpetuate structures that disenfranchise people of color. Yet, they are everywhere—and they often serve to prevent people of color from economic advancement.
A recent analysis by Reveal from the Center for Investigative Journalism found that despite laws to ban racial discrimination in housing loans, blacks and Latinos are still denied mortgage loans much more often than whites.
The yearlong analysis, based on 31 million records, relied on techniques used by leading academics, the Federal Reserve and Department of Justice to identify lending disparities.
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. African Americans faced the most resistance in Southern cities - Mobile, Alabama; Greenville, North Carolina; and Gainesville, Florida - and Latinos in Iowa City, Iowa.
No matter their location, loan applicants told similar stories, describing an uphill battle with loan officers who they said seemed to be fishing for a reason to say no.
There are so many reasons about why this is problematic and deeply disturbing, so it’s hard to know where to begin. But let’s start with this: home ownership in the United States is directly tied to economic opportunity and wealth. Those who qualify for mortgage loans become eligible for borrowing more money over time as the equity in their home grows. That wealth gets passed down through generations. And we can see a clear pattern between the net worth of individuals who are homeowners and those who are not. As Lisa Rice, executive vice president of the National Fair Housing Alliance says, “For a typical family, the largest share of their wealth emanates from homeownership and home equity.”
A child born into a wealthy family, for example, is six times more likely to become a wealthy adult than a child who grows up poor. Homeownership has long been a central part of this equation. In 2015, the average net worth of a homeowner in was $195,400, compared to just $5,400 for a renter, according to the Federal Reserve.
Robbing people of color of home loans denies them the chance to develop wealth and economic prosperity. And though it is a practice which impacts Latinos, Asians and Native Americans alike, it is particularly targeted toward blacks.
The analysis - independently reviewed and confirmed by The Associated Press - showed black applicants were turned away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three. In Washington, D.C., the nation’s capital, Reveal found all four groups were significantly more likely to be denied a home loan than whites. [...]
The disproportionate denials and limited anti-discrimination enforcement help explain why the homeownership gap between whites and African Americans is now wider than it was during the Jim Crow era.
While laws exist on the books to combat this type of discrimination and to hold banks accountable for their lending practices, part of the problem is that there is little to no enforcement coming from the federal government. The Obama Justice Department sued only nine lenders for failing to lend to people of color. And, not surprisingly, no lenders have been sued during Donald Trump’s time in office.
Financial institutions across the country maintain that there is not rampant discrimination in lending. They point to the creditworthiness of applicants which makes them eligible or ineligible by their loan standards, regardless of race. Yet, not only is that system outdated—it also fails to account for the fact that people of color are disproportionately negatively impacted by credit scoring.
The “decades-old credit scoring model” currently used “does not take into account consumer data on rent, utility, and cellphone bill payments,” Republican Sen. Tim Scott of South Carolina wrote in August, when he unveiled a bill to require the federal government to vet credit standards used for residential mortgages. “This exclusion disproportionately hurts African-Americans, Latinos, and young people who are otherwise creditworthy.”
Here is where racism doesn’t necessarily need an individual actor to be perpetuated and impact the lives and well-being of people of color. While there may be individual loan officers who are the problem, it is fundamentally a structural problem that prevents people of color from fully participating in the economic opportunities in this country. It is also cyclical. Fifty years after fair housing laws, we seem to be back at square one. And considering that the issue hasn’t improved under Republicans or Democrats, it’s unlikely to improve anytime soon.