It’s been half a century since the federal government banned discrimination in the home mortgage industry. But a new analysis of mortgage data shows people of color are still routinely denied conventional mortgage loans far more often than white people.
That’s especially true in 61 metro areas across the country, including Lansing and Detroit, even when controlling for applicants' income, loan amount and neighborhood.
In Detroit, black loan applicants in 2016 were 1.8 times more likely to be denied a loan than their non-Hispanic, white counterparts. In Lansing, the odds are even bleaker for black applicants, who were more than three times as likely to face denial.
Reveal (a program from The Center for Investigative Reporting) and the Associated Press conducted the yearlong analysis – combing through millions of mortgage records from 2015 and 2016 available via the Home Mortgage Disclosure Act. They found a pattern of denials for people of color in the conventional loan market.
Loan denial rates for Asian, Latino and Native American applicants in both Lansing and Detroit were either not statistically significant for one or both years, or there were not enough total applicants to make an analysis in one or both years. For instance, there were just 22 applicants who identified as Native American in the Detroit metro area and 10 in Lansing.
"It's hard for me to look at the data at the end and say, 'Oh that's discrimination.' I personally just don't believe that happens,” Jim Wickham, current president of the Michigan Mortgage Lender Association, said in response to the analysis.
“Twenty years ago, a lot of times it was people looking at a file and making a judgment call as to whether or not that loan should be approved or denied. In lending today, the process is extremely automated,” Wickham said.
“Maybe I'm naive, but I think the processes have been well thought out and vetted. They're improved every year,” he said.
Union Home Mortgage, where Wickham works, has a relatively low denial rate, about 12% for black applicants in the Detroit metro area.
The average denial rate for black applicants in the Detroit metro area in 2016 was 22%.
The top three lenders to black applicants in Detroit, Quicken Loans, Bank of America and Huntington Bank, denied black applicants at a much higher rate than that average. Huntington Bank denied nearly half the Detroit black applicants in who applied in 2016, but only 14% of white applicants in the same area.
Terry Francisco, a communications executive with Bank of America, emphasized some aspects of the data, including an applicant's credit score, is not available to reporters and the public.
"We have robust compliance and monitoring procedures in place and disparities can be explained by legitimate credit factors," Francisco said in an email response.
"We’ve not seen the study, but our goal is to help all customers achieve their dream of homeownership," wrote Seth Seymour, a corporate communications manager at Huntington Bank. "We’re fully committed to fair lending, and each loan is reviewed on an individual basis."
Wickham believes some lenders with massive ad campaigns encouraging everyone to apply may skew the results.
He points to Rocket Mortgage, by Quicken Loans as an example. The Detroit based company ran a Super Bowl commercial promoting preapproval in 8 minutes.
“So their messaging to the American consumer is, getting a mortgage is easy and everyone should try. They’re going to have a lot more denials because they’re asking everyone to try because they say it’s easy,” Wickham said.
In a way, that’s good, Wickham says, because a broader audience of people who may not have otherwise considered the option, decide to apply for a home loan. But it also likely translates into a higher denial rate, he says.
For Union Home Mortgage and other smaller lenders “it’s more of a rifle approach,” Wickham said. “Where a Quicken Loans or some of the big national banks have more of a shotgun approach,” he said.
In Detroit, where housing values have plummeted, land contracts have been on the rise.
One newer mortgage program allows Detroiters to finance $75,000 above the appraised value of a home. Since its launch about a year ago 145 families have closed on mortgages using the program, officials said this week.
What about my community?
You might be wondering why other places aren't on this list – places like Grand Rapids, where we've already done a lot of reporting on inequality. Data analysts say just because a metro area isn’t on their list of 61 communities, doesn’t mean there aren't any problems.
For example, black people make up 6% of the population of the Grand Rapids-Wyoming metro area -- but they only received 1% of loans there. Almost across the board, white applicants were over represented in Detroit and many other Michigan counties compared to the total white population.
The analysis only looks at conventional loans. It does not include special loans for veterans, rural development loans nor Federal Housing Administration (FHA) insured loans – a type of loan known for providing lower income Americans access to mortgages.
While Reveal’s data shed new light on conventional lending disparities across the country, the persistence of racial discrimination has a long history in Michigan’s housing market.
A data investigation released last summer analyzed housing maps produced by the Home Owners Loan Corporation for later use by the Federal Housing Administration. It revealed New Deal-era federal agencies rated the risk of awarding loans to homeowners based on their neighborhoods using racial bias.
In 1941, a wall stretching from the northern boundary of Van Antwerp Park in Detroit to just south of 8 Mile Road was constructed in an effort to but a physical barrier between white and black blocks. According to one historian, the Federal Housing Authority wouldn't guarantee loans for houses without the wall.
That wall, by the way, is still there -- a physical reminder of historic redlining that perpetuates racial segregation within the state today.
Lansing also has a documented history of redlining throughout the 1960s and 70s. This came to the forefront last month, when a 15-year-old East Lansing High School freshman wrote an essay addressing his decision to sit during the national anthem: discrimination blacks in the city faced for decades when trying to purchase homes in the city.
The student’s efforts have raised a magnifying glass to the city’s tense racial history, sparking conversations within city offices on how best to foster dialogue and issue an apology.
This story was produced in partnership with Reveal from The Center for Investigative Reporting and PRX. For more, go to revealnews.org/redlining. Nisa Kahn contributed to this story.