Report: Lending to Minorities Scaled Back Disproportionately
Some troubling findings today out of the Woodstock Institute, which examined home lending trends in seven major cities to discover that banks have scaled back prime loans to minority communities at a much quicker clip than they’ve reduced those same loans in predominately white neighborhoods.
The group — in collaboration with the California Reinvestment Coalition, the Community Reinvestment Association of North Carolina, the Empire Justice Center, the Massachusetts Affordable Housing Alliance, the Neighborhood Economic Development Advocacy Project and the Ohio Fair Lending Coalition – found that between 2006 and 2008:
- Prime lending in communities of color decreased by 60.3 percent, compared to 28.4 percent in predominantly white neighborhoods.
- Prime refinance lending declined by 66.4 percent in neighborhoods of color, and by 13.9 percent in predominantly white areas.
- The overall share of prime refinance loans made to communities of color shrank by 35 percent, whereas the share made to predominantly white communities increased by 11 percent.
- Prime refinance lending by the country’s four largest banks – Bank of America, Citigroup, JPMorgan Chase and Wells Fargo – to predominantly white communities collectively increased by 32 percent, whereas prime refinance lending to communities of color declined by 33 percent.
“After inflicting harm on neighborhoods of color through years of problematic subprime and option ARM loans, banks are now pulling back at a time when communities are most in need of responsible loans and investment,” said Geoff Smith, Woodstock’s senior vice president, said in a statement. “We are concerned that we have gone from a period of reverse redlining to a period of re-redlining.”
The groups are recommending that Congress tackle the problem by modernizing the Community Reinvestment Act, creating a strong Consumer Financial Protection Agency and bolstering enforcement of existing fair-lending laws.
All food for thought as Senate lawmakers continue the long slog to pass financial reforms this month.