Kept Out: Banks Across U.S. Caught Systematically Rejecting People of Color for Home Loans

StoryFebruary 15, 2018
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A shocking new investigation by Reveal and the Center for Investigative Reporting has uncovered evidence that African Americans and Latinos are continuing to be routinely denied conventional mortgage loans at rates far higher than their white counterparts across the country. Reveal based its report on a review of 31 million mortgage records filed with the federal government in 2015 and 2016. The Reveal investigation found the redlining occurring across the country, including in Washington, D.C., Atlanta, Detroit, Philadelphia, St. Louis and San Antonio. We speak to Aaron Glantz, senior reporter at Reveal from The Center for Investigative Reporting, and Rachelle Faroul, a 33-year-old African-American woman who was rejected twice by lenders when she tried to buy a brick row house in Philadelphia, where Reveal found African Americans were 2.7 times as likely as whites to be denied a conventional mortgage.

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NERMEEN SHAIKH: A shocking new investigation by Reveal and The Center for Investigative Reporting has uncovered evidence that African Americans and Latinos are continuing to be routinely denied conventional mortgage loans at rates far higher than their white counterparts across the country. Reveal based its report on a review of 31 million mortgage records filed with the federal government in 2015 and 2016. This is Reveal data reporter Emmanuel Martinez speaking on PBS NewsHour about the investigation.

EMMANUEL MARTINEZ: Here we have the likelihood of denial. So, black applicants in Philadelphia are almost three times as likely to be denied a conventional mortgage.

REPORTER: Reveal found this troubling pattern in dozens of cities. Philadelphia was one of the largest.

EMMANUEL MARTINEZ: In 61 metros across the country, applicants of color are more likely to be denied a conventional mortgage, even if they have the same financial characteristics as a non-Hispanic white applicant.

AMY GOODMAN: The Reveal investigation found the redlining occurring across the country, including in Washington, D.C., Atlanta, Detroit, Philadelphia, St. Louis, San Antonio, Texas. The report is being published as the nation is preparing to mark the 50th anniversary of President Lyndon B. Johnson signing the Fair Housing Act in April of 1968.

PRESIDENT LYNDON JOHNSON: The voice of justice speaks again. It proclaims that fair housing for all, all human beings who live in this country, is now a part of the American way of life.

AMY GOODMAN: We’re joined now by two guests: Aaron Glantz, senior reporter at Reveal from The Center for Investigative Reporting, his new investigation headlined “Kept Out: How banks block people of color from homeownership”; and we’re joined by Rachelle Faroul, a 33-year-old African-American woman who was rejected twice by lenders when she tried to buy a brick row house in Philadelphia, where Reveal found African Americans were 2.7 times as likely as whites to be denied a conventional mortgage. She was only able to buy a home when her half-white partner, Hanako Franz, signed on. At the time, Hanako was nearly unemployed and working part-time at a grocery store.

Aaron and Rachelle, we welcome you both to Democracy Now! Aaron, let’s begin with you in San Francisco. First of all, explain what redlining is and, then, how African Americans and Latinos are kept out, why this is such a critical story today.

AARON GLANTZ: Well, Amy, 80 years ago, the federal government drew lines on map—

AMY GOODMAN: Well, we seem to have lost Aaron for a moment, in a little satellite glitch. So, why don’t we go right off to Ta-Nehisi Coates He talked about the legacy of redlining during an appearance on Democracy Now! a few years ago, the significance of what this means for the black and the Latino unity.

TA-NEHISI COATES: There’s no way to understand housing as it exists today without federal policy. Black people, as was the thinking at the time, could not be responsible home loaners. The FHA literally drew up the redlining map and then basically distributed—I’m sorry, the Home Owners’ Loan Corporation actually did it, and then distributed to banks who used that as policy to determine how they would lend and who they would lend to. The racism in the system was pervasive and total. And the fact that African Americans have been cut out of it is not shocking if you understand what the country was in the 1930s and the 1940s. And this redounds throughout generations. As we know, homes are how people in America build wealth, largely. And if you cut black people out of that opportunity, a lot is explained about what the African-American community looks like today.

AMY GOODMAN: So, that was Ta-Nehisi Coates. Rachelle Faroul, tell us your story. You managed a million-dollar grant in your job at the University of Pennsylvania, are a contractor with Rutgers University. Two lenders turned you down when you tried to buy a home?

RACHELLE FAROUL: Yes. And thank you so much for having me.

I started my homeownership journey in 2016, soon after I moved to Philadelphia from Brooklyn, where I was born and raised. And I wanted to own property, like my mom, like many of her siblings and their parents. And from the beginning, it was just so difficult for me to make this happen. And it’s not to say that I am at all surprised. As an organizer, as someone who is very well read and well versed in all of the ways that black people in America have been disenfranchised routinely over the years, I was more hurt than surprised.

And it really wasn’t until my partner, Hanako—who identifies as Asian, not half-white—stepped in and offered to be my co-borrower that it was pretty much smooth sailing, to the extent that our application was approved. But as soon as she came on, I was largely ignored, and really all that mattered was my money.

That is, unfortunately, not the experience of a large number of black people who try to buy homes in America. Most of us are routinely denied, our applications are rejected, and we are forced to continue to rent from people who don’t care about us, don’t care about our well-being and don’t really consider or value the ways in which we help them accrue wealth.

NERMEEN SHAIKH: And, Rachelle, could you talk about how it is—I mean, you tried, on two different occasions, to get a loan. How did the loan officers treat you, and how did they treat your partner?

RACHELLE FAROUL: Sure. So, in 2016, when I started this process by myself, I had all of the paperwork. I had my tax returns, which I do every year. At that time, I was freelancing and was told that I needed to have more steady income, because so much of my income at the time was undocumented, and to the extent that I was being paid in cash or I wasn’t being paid regularly, and they told me that I needed to have a full-time job.

I then asked if it was possible for me to have a co-signer, and they said yes. I asked my mom. She said yes right away, because this has been just as much a dream for her as it has been for me. And we were rejected right away. And Angela Colloi from FHA told us that the reason why my mom couldn’t be a co-signer was because she had too much student loan debt from her Ph.D., from my bachelor’s and also from my brother’s. My mom has been incredible in helping me stay afloat, my brother and I stay afloat, over the years. And it was really hurtful. At that time, I was mostly hurt for her, because she wanted to be able to support her child in this, you know, really impactful and powerful way and was told that she couldn’t.

And so, I left it at that and got a full-time job here at Penn, where I still work, managing a large grant. And about a year later, I started the process again with the Penn Home Ownership Services, a forgivable loan that’s offered to Penn employees. And again I experienced a lot of difficulty, this time with Santander Bank.

It was, overall, a—I would say, a humiliating process, but one that was also really beautiful, in a way, because all of the people who showed up for me, including Aaron, Ray, the entire team at The Center for Investigative Reporting, Hanako, who is an incredible human, my friends, my colleagues. Folks really, you know, understood the meaning of what is happening, and did as much as they could to support me in my journey. And so, while this has been—and still is, you know, months after we closed—this has been, you know, a reckoning. Again, I am really happy with the way some people showed up for me.

AMY GOODMAN: So you only got it when Hanako signed on with you?

RACHELLE FAROUL: I’m sorry?

AMY GOODMAN: You only got it when Hanako signed on with you?

RACHELLE FAROUL: Yes. And it’s kind of ridiculous. I mean, it’s something that we still laugh about. So, Hanako’s co-borrower application was approved at a time when her credit score was in the 700s. And that is what mattered most, for whatever reason. What didn’t matter at all was the fact that Hanako was working part-time at a grocery store. Her most recent pay stub was like $115. I was helping her pay her health insurance, because, you know, she had such little cash.

AMY GOODMAN: Well, listen, before we get to the end of the show, we wanted—

RACHELLE FAROUL: But even so, she was considered more qualified than me.

AMY GOODMAN: We wanted to bring Aaron Glantz in, although I think we just have you on the telephone, not in a studio, Aaron, because of the satellite glitch. But explain what redlining is and why this is such an important exposé, “Kept Out: How banks block people of color from homeownership.”

AARON GLANTZ: Well, I mean, as you said earlier, President Lyndon Johnson signed the Fair Housing Act in 1968, and that was supposed to make mortgage discrimination illegal. And it was supposed to allow people to build wealth, no matter what their race was. And it was supposed to end segregation. And what we found in our investigation, 50 years later, is that in dozens of cities across the country people of color are still being turned away from the opportunity to live the American dream.

And further, we found that the government is completely dropping the ball on its enforcement of these laws. We found that the Obama administration had sued only a handful of banks for violating the Fair Housing Act. In his first year in office, the Trump administration’s Justice Department did not sue a single financial institution. And the Office of Comptroller of the Currency, which is in charge of enforcing another law called the Community Reinvestment Act, which is supposed to get banks to lend in low-income communities and underserved neighborhoods, was passing these institutions on their community lending reviews, 99 point—99 percent of the time. So, basically, the government is saying that everyone in the banking and mortgage industry is doing a fantastic job. And yet we found that across the country people of color are being turned away, even when they make the same amount of money as whites, even when they’re trying to take on the same size loan as whites, and even when they’re trying to buy in the same neighborhoods as whites.

AMY GOODMAN: And you found that Philadelphia, where Rachelle Faroul is, was particularly egregious.

AARON GLANTZ: We found that in Philadelphia African Americans were 2.7 times more likely to be turned away for a loan, even when you take into account factors that loan officers should be using, like income, that race was still a factor, even after taking into account income and the size of the loan. But, as you mentioned, Philadelphia is not the only city. We found this problem in Atlanta. We found it in Washington, D.C. We found it in San Antonio, Texas, and Detroit, Michigan, and Santa Fe, New Mexico, and Tacoma, Washington. All over the country, 61 metropolitan areas total, we found—

AMY GOODMAN: We’re going to have to leave it there, Aaron, but we will link to your piece, “Kept Out.” And thanks so much to Rachelle Faroul.

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