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Study: Mortgage Lenders Shun Baltimore's Black Neighborhoods

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By Sheryl Estrada


Baltimore’s Black residents seeking home loans are consistently denied by mortgage lenders, according to a new study.

The National Community Reinvestment Coalition’s (NCRC) study “Home Mortgage and Small Business Lending in Baltimore and Surrounding Areas,” released on Nov. 17, analyzed public data and found tremendous disparities in home lending for Black and white residents.Government mortgage data does not include information such as credit scores of potential borrowers, which would make it possible to confirm reasons mortgage lenders give for denials.

However, NCRC’s Director of Research and Evaluation Jason Richardson told DiversityIncwhen a Black resident of Baltimore is denied a mortgage loan,it’s most likely about race, not because of tighter mortgage lending practices or credit history.

“If you look at the data on lending within the city, an African American borrower is going to see the same approval rating in a middle- or upper-income neighborhood in the surrounding suburbs that an upper-income borrower would see in a low-to-moderate income in the city,” Richardson said.

“In other words,” he continued, “the same borrower can leave the city, go to a low-to-moderate income neighborhood in the suburbs and get a loan. If we assume that low-to-moderate income borrowers tend to have similar credit profiles that would suggest that it’s not all about credit.

“In fact, it looks like people with bad credit can do a lot better at getting a loan if they’re not in the city of Baltimore. So that suggests the issue might have more to do with the neighborhood itself and with the composition of the neighborhood.”

Key Findings of the Study

Between 2011 and 2013, the amount of loans approved in the city of Baltimore was significantly and positively correlated with the percentage of white residents in a neighborhood. Meanwhile, the percentage of Black residents in a neighborhood had a significantly negative correlation.

The population of Baltimore is 63.1 percent Black and 31.6 percent white.

In 2013, the disparity ratio of loans to percentage of population was 210 percent for whites and 37 percent for Blacks.

A Snapshot of Lending in 2013 in Baltimore City
PopulationApplicationsOriginationsApproval RateDisparity Ratio Loans/Population Size
White174,1202,6531,99975%210%
Black392,9381,30479761%37%

*Property Type is One to Four-Family and (Purpose is Home Purchase) and (Occupancy is Owner Occupied) and (Action is Originated or Approved Not Accepted or Denied or Withdrawn or Closed Incomplete)

Black residents in Baltimore are almost twice as likely to have mortgage applications rejected.

The study found that in surrounding suburban counties, income and thepercentage of owner-occupied houses, not race, are the best predictors of lending activity.

A Snapshot of Lending in 2013 in Baltimore County, Anne Arundel County, and Howard County
PopulationApplicationsOriginationsApproval RateDisparity Ratio Loans/Population Size
White1,063,91413,19510,38278.68%224%
Black337,8822,7331,84967.65%18%

*Property Type is One to Four-Family and (Purpose is Home Purchase) and (Occupancy is Owner Occupied) and (Action is Originated or Approved Not Accepted or Denied or Withdrawn or Closed Incomplete)

According to the study results, a low-to-moderate income applicant is 30 percent more likely to be approved for a mortgage loan in a middle- or upper-income area of Baltimore County than in a low-to-moderate neighborhood of Baltimore City.

“In Howard County some of the areas, which are heavily African American, are seeing a lot of mortgage loan activity,” Richardson said.

Richardson told DiversityInc that Baltimore has a long history of segregation and housing access issues.

“[The city] is the seat of some of the longest running programs on segregation and housing that extend back beyond the 20thcentury, back into the 19thcentury, where Blacks were segregated to specific areas,” he said.”And we still see today those areas [are] predominantly black, but also, uniformly, banks are simply not lending money in those neighborhoods. And that seems to be independent of what’s going on just outside of the city, where you have some of the wealthiest counties in the country.”

Black and White Baltimore

According to The Baltimore Sun, racial division in the city is most evident in northern Baltimore, “where neighborhoods west of York Road including Guilford and Homeland are majority white and those east of the road including Greater Govans and Northwood are majority Black.”

On April 12, Freddie Gray, 25, was arrested in West Baltimore. He died a week later from a spinal cord injury sustained during a “rough ride” in a police transport van before arriving at the Western District police station. Gray’s death was ruled a homicide and the six officers involved have been charged. Jury selection began on Monday for the first trial.

Related Story: The Misery That Is Black Baltimore

It’s much harder to get a mortgage loan in the poorer neighborhoods, like West Baltimore, which is predominantly Black and has suffered years of neglect.

The study states:

In an area that is 97 percent black, the perpetuation of poverty continues, with overhalf of households reporting incomes under $25,000, double the unemployment rate of the rest of the city, and one of the highest incarceration rates in the stateof Maryland. This is despite the investment of over $100 million a generation ago, an investment that was never capitalized on while support and reinvestment poured into the nearby Inner Harbor.

Related Story: CVS Health to Rebuild, Invest

West Baltimore is a stark contrast to areas with smaller minority populations such as the city’s Middle East section around Johns Hopkins University, Fells Point, Federal Hill and the affluent Inner Harbor where there’s an influx of white, college-educated residents.

NCRC’s Intentions

One of the founding purposes of NCRC is surrounding the Community Reinvestment Act, which specifically places an affirmative obligation on banks to serve the credit needs of the communities where they’re chartered, including low- and moderate-income communities.

The data for this study was downloaded from U.S. government sources,which include the 2010 U.S. Decennial Census, the 2013 5-year American Community Survey and the Consumer Financial Protection Bureau (CFPB) Home Mortgage Disclosure Act (HMDA) 2011-2013 data.

“We intentionally used nothing but public data,” Richardson said. “My intention in writing the study this way, using public data and being particularly transparent, is so this can be replicated. I’d like to encourage local groups to connect with us so we can help them in producing something similar for their own neighborhood.”

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