In April 2016, Rachelle Faroul, a 33-year-old black woman, applied for a mortgage loan. Even though she had a good credit score, a degree from Northwestern and a job making $60,000 a year teaching computer programming at Rutgers University, her application was denied.
I know what you’re thinking, but it was not because she was black.
A mortgage broker from Philadelphia Mortgage Advisors, whose customers were 90 percent white, told Faroul that her income as a contract employee wasn’t stable enough. When Faroul got a full-time job managing a million-dollar grant, she was turned away by another loan officer, who wouldn’t even return Faroul’s calls.
Instead of trying again, Faroul decided to let her partner, Hanako Franz, try to obtain a loan from the same company. The couple knew it was a long shot because Franz only worked part time at a grocery store and her most recent paycheck only showed $144.65. In fact, Faroul was more qualified for a loan than her partner in every way except one: Hakano Franz was half-white, half-Japanese.
Hakano Franz got the loan.
A new report by the Center for Investigative Reporting along with Reveal News explores how U.S. banks systematically prevent blacks and Hispanics from becoming homeowners. The in-depth examination reveals that banks in 48 cities have engaged in a modern-day system of redlining that turns away black borrowers at significantly higher rates than whites, regardless of income, payment history and other factors.
The evidence was not anecdotal. The analysis used the Mortgage Disclosure Act to look at 31 million records over two years. The lending data was independently confirmed and reviewed by the Associated Press and basically covered every single conventional mortgage in 2015 and 2016.
The information covered nine factors, including income, the amount of the loan, the ratio of the size of the loan to the applicant’s income and the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property.
Because credit-reporting agencies do not disclose how they determine credit scores, the study could not include it in their research. Banks say that credit scores are not the overwhelming factor in their lending decisions, and some studies (pdf) have shown credit scores to be discriminatory because they do not include rent, utility payments, income and cellphone bills. Besides, the investigation had access to the information that supposedly determines credit scores.
Here is what they found in some major metropolitan areas:
- In the Greater Atlanta area, black applicants were 2.4 times as likely to be denied a conventional home mortgage as white applicants.
- In the Greater Washington, D.C.-Virginia-Maryland region, black applicants were denied 2.2 times as often as whites.
- Lenders in Philadelphia turned away black applicants at 2.7 times the rate of white applicants.
- Blacks in St. Louis were denied mortgages 2.5 times as often as whites.
- Mobile, Ala., and Greenville, N.C., were the worst. Potential black homebuyers were turned away at 5.6 times the rate of their white counterparts.
None of this is new. JPMorgan Chase paid $55 million in January to settle charges that it discriminated against black and Latino borrowers. In 2011, Bank of America handed over $335 million for making its minority customers pay more than its white customers for the same loans. Just this past May, the city of Philadelphia filed a federal lawsuit against Wells Fargo, alleging that the bank has discriminated against black and Latino borrowers since 2004.
Despite this information, financial institutions across the country continue to discriminate against black and Latino borrowers. ProPublica uncovered car insurers doing the same thing. The Wall Street Journal reported on inequities in auto loans.
This is the real-world economic manifestation of privilege. If you’re black—no matter how hard you work or how much money you earn—there is only one thing that you can never gain: