Modern-Day Redlining: Banks Face Probes for Refusing Home Loans for People of Color

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A shocking new investigation by Reveal and the Center for Investigative Reporting has uncovered evidence that African Americans and Latinos continue to be routinely denied conventional mortgage loans, even at rates far higher than their white counterparts, across the country. According to the piece, the homeownership gap between whites and African Americans is now wider than it was during the Jim Crow era. Reveal based its report on a review of 31 million mortgage records filed with the federal government in 2015 and 2016. The investigation found the redlining occurring across the country, including in Washington, D.C., Atlanta, Detroit, Philadelphia, St. Louis, and San Antonio, Texas. Since its publication earlier this month, the report has sparked national outrage and, in some states, unusually swift political action. Pennsylvania’s attorney general and state treasurer have both launched investigations into redlining in Philadelphia. We speak to Pennsylvania state Senator Vincent Hughes and Aaron Glantz, senior reporter at Reveal from The Center for Investigative Reporting. His new investigation is headlined “Kept out: How banks block people of color from homeownership.”

Transcript
This is a rush transcript. Copy may not be in its final form.

JUAN GONZÁLEZ: A stunning new investigation by Reveal and The Center for Investigative Reporting has uncovered evidence that African Americans and Latinos continue to be routinely denied conventional mortgage loans even at rates far higher than their white counterparts across the country. According to the piece, the homeownership gap between whites and African Americans is now wider than it was during the Jim Crow era. Reveal based its report on a review of 31 million mortgage records filed with the federal government in 2015 and 2016. The investigation found the redlining occurring across the country, including in Washington, D.C., Atlanta, Detroit, Philadelphia, St. Louis, and San Antonio, Texas.

AMY GOODMAN: Since its publication earlier this month, the report has sparked national outrage and, in some states, unusually swift political action. Pennsylvania’s attorney general and state treasurer have both launched investigations into redlining in Philadelphia. This is Democratic state Senator Vincent Hughes of Pennsylvania questioning Pennsylvania Attorney General Josh Shapiro during a recent Senate budget hearing.

SEN. VINCENT HUGHES: Are you aware of the study that was just published by The Center for Investigative Reporting that looks at discriminatory lending practices? It titles—the study titles itself “Kept out.” OK, consciously. Are you aware of this research? Are you knowledgeable about what’s been going on in this area?

ATTORNEY GENERAL JOSH SHAPIRO: I am aware of it. And, frankly, I’m disgusted by it. And I read the articles. We were aware of some of this even before the articles came out. It is—it is not only wrong in terms of what’s happening to that individual who’s being denied a mortgage, you know, based on this reporting, but, to your point, it holds the city back. It holds neighborhoods back and blocks back. It holds people back from achieving what they are capable of achieving. Obviously, I’ve been very careful today about saying too much about investigations. I will take the somewhat unusual step of announcing here today that we have launched an investigation into this—

SEN. VINCENT HUGHES: Great.

ATTORNEY GENERAL JOSH SHAPIRO: —through—and it’s important to know—my Bureau of Consumer Protection. And, you know, we are chasing this down, and we take this seriously.

JUAN GONZÁLEZ: Meanwhile, the Philadelphia City Council has passed a motion for oversight hearings, and community groups in redlined neighborhoods have begun organizing to pressure culpable banks to end their racially discriminatory practices.

All this comes as a bipartisan group of lawmakers on Capitol Hill is moving to gut provisions of the Dodd-Frank financial reform bill enacted after the 2008 financial crisis. The bill forces banks and credit unions to disclose to the government detailed information about who they lend to. The ranking Democrat on the Senate Banking Committee, Senator Sherrod Brown of Ohio, has cited Reveal’s reporting as a reason for Congress to put the brakes on this effort.

AMY GOODMAN: Well, for more, we’re joined by two guests. In San Francisco, California, we’re joined by Aaron Glantz, the senior reporter for Reveal from The Center for Investigative Reporting, his new investigation headlined “Kept out: How banks block people of color from homeownership.” And joining us from the capital of Pennsylvania, from Harrisburg, Democratic state Senator Vincent Hughes of Pennsylvania, who serves as the Democratic chairman of the Senate Appropriations Committee.

Thanks, both, for joining us. Aaron, if you would start out by laying out what your investigation, “Kept out,” found and what exactly redlining is?

AARON GLANTZ: We wanted to know why it was, as you mentioned in your intro, that even though segregation and housing discrimination has been illegal for 50 years, that the homeownership gap between blacks and whites in America is now greater than it was during the Jim Crow era. So, we analyzed 31 million mortgage records. My colleague Emmanuel Martinez went through virtually every mortgage application that was made in the United States in 2015 and 2016, using data available under the Home Mortgage Disclosure Act. And we controlled for how much money a person made and the neighborhood they wanted to buy in and the size of the loan they wanted to take on and six other social and economic factors that might play into whether or not a person would get a mortgage, whether or not a person would be able to buy a home.

And we found that in 61 cities across the country, including Philadelphia, St. Louis, Detroit, San Antonio, Orlando, Gainesville, Washington, D.C., in all of these cities around the country, people of color were more likely to be denied a conventional home purchase loan, even when they made the same amount of money as their white counterparts, even when they wanted to buy in the same neighborhood as their white counterparts, and even when they wanted to take on the same size loan as their white counterparts.

JUAN GONZÁLEZ: Well, I’d like to ask Senator Hughes—the starting line in this piece is: The homeownership gap between whites and African Americans is now wider than it was during the Jim Crow era. Did that come as a surprise to you? And your reaction to the series, overall?

SEN. VINCENT HUGHES: Well, I think what we have to do is look at this directly, from the great reporting that Reveal did, and understand the ripple effect that comes when you have this kind of discrimination going on. For example, Philadelphia has the largest poverty rate of any major city in the nation, 26 percent—largest deep poverty rate of any city in the nation. The ripple effect on housing stock, we’ve got 15,000 vacant houses. The ripple effect on wealth and across the board. And broader policy, the ripple effect on education funding, because now, because of this problem, we don’t have the capacity to provide local dollars to a state that’s not doing what it’s supposed to do in terms of funding basic education in Pennsylvania. So, what we’re talking about specifically around the discrimination piece, but then we have to broaden the lens to see how this plays itself out across the board on a number of other public policy matters. And it is an extremely, very, very serious problem.

JUAN GONZÁLEZ: Aaron, I wanted to ask you—you mentioned that it’s been 50 years since redlining was outlawed. And most Americans are familiar with the term “redlining,” but they’re not really familiar with how discriminatory lending policies occurred. And I wanted to ask you to talk a little bit about that. In my book, Reclaiming Gotham, I mentioned some of the people who were the forerunners of this, a trio of individuals—[Homer] Hoyt, Frederick Babcock, Ernest Fisher—who were theoreticians of housing value in the United States and who ended up running the FHA, but they all had racially biased views—the FHA being the agency that insured many of the home mortgages in the ’30s, ’40s, ’50s and even today. For instance, Babcock said things like, “There is one difference in people, namely race, which can result in very rapid decline [of property values].” And so, they basically were the people who created this grading system, by ethnic and racial groups, of who was best suited to obtain a federally insured mortgage. And this has become, as you mentioned, until 1968, the basis for most lending in the United States. But how has it continued even after it was outlawed?

AARON GLANTZ: Well, I mean, that’s what we wanted to know, right? I mean, back in the 1930s, there were employees of the federal government in the Home Owners’ Loan Corporation, went out into cities. They drew lines on maps. They said certain neighborhoods were “hazardous” to lending—that was their word—because they were threatened by Negroes or infiltrated by Negroes or infiltrated by foreigners, and that’s why they told banks to stay away back in the 1930s. Fast-forward to the 1960s, all that becomes illegal. And yet here we are, many generations later, and we’re seeing some of the same results.

And I should add, we looked at those old redlining maps in Philadelphia and other cities. And we found that there were some neighborhoods that were redlined back in the day that still couldn’t get loans. But then we found something else that I found, frankly, even more disturbing: that there were neighborhoods that were redlined back in the day that now were getting loans, but only to white gentrifying newcomers. And then there were other neighborhoods in Philadelphia that were middle-class, African-American neighborhoods, where people made good money working union or other middle-class jobs, and just wanted to get a nice home improvement loan to keep up their property or refinance their debt so they could have a comfortable retirement, and the banks there were saying no, as well. And those were neighborhoods, some of them, that back in the 1930s were colored blue or green. They were deemed best or desirable by the Home Owners’ Loan Corporation. Back then, they were white neighborhoods. We found that if a neighborhood, over time, had gone from a predominantly white neighborhood to now being a majority people of color neighborhood, that those neighborhoods, as well, now faced denial today.

AMY GOODMAN: Let’s end this segment with President Lyndon Baines Johnson 50 years ago, April 1968, signing the Fair Housing Act.

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: That was Lyndon Baines Johnson 50 years ago, in 1968. We’ll continue with Aaron Glantz, senior reporter at Reveal, and Vincent Hughes, Democratic state senator of Pennsylvania, in a moment.

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