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Discrimination In Mortgage Lending No Surprise
GRAND RAPIDS — In a study of the mortgage lending practices of area lending institutions, the Fair Housing Center (FHC) of Greater Grand Rapids found evidence of discriminatory practices and differences in the treatment of blacks and Hispanics versus whites.
Funded by the City of Grand Rapids, the project involved 51 tests administered across 24 mortgage lending institutions in Kent County that included both large and small banks and private mortgage companies.
The FHC reviewed Home Mortgage Disclosure Act (HMDA) data as well as previous mortgage lending discrimination complaints received by its office, then selected two dozen lending institutions it deemed representative of the local industry.
Fourteen white, black and Hispanic “testers” visited selected sites between September and December last year, and in each case the black or Hispanic tester “was scripted to be better qualified for a loan” than the white tester.
The report concluded that blacks and Hispanics were treated differently from whites in 20 of the 51 tests administered.
Testing indicated whites generally received more favorable treatment and were provided with more information and documents than were blacks and Hispanics.
In 39 percent of cases, the study found that black and Hispanic testers:
- Were not offered a good faith estimate on the transaction’s closing costs.
- Were not offered an application
- Were told a credit history was necessary before specific information about interest rates or products could be disclosed.
- Were given only Federal Housing Administration (FHA) loan information.
- Were given information pertaining to the responsibilities of becoming a homeowner.
- Were quoted different interest rates.
- Were not receiving follow-up contact from lenders.
Testing also revealed that whites were more likely to get a good faith estimate without a request for credit history; they were often given more product options; and they sometimes received more of the lenders’ time than did members of the other test group.
Regina Davis, investigation coordinator for the FHC and the author of the report, said the center was disappointed with the results but not surprised by them.
“We know 39 percent is a lot for the area,” Davis remarked. “There are lots of complaints that come into the center so we’re not surprised that this is going on. We’re well aware of what goes on in the different industries.”
Robert Upton, fair housing officer for the city’s Equal Opportunity Department, wasn’t surprised by the results either.
“We weren’t shocked. We hear the stories of individuals who have tried to obtain a mortgage and have been denied on the basis of their race,” he said.
While the local FHC acknowledged that some of the differences in treatment among the groups might appear minor, the organization maintained “taken as a whole, these differences have a devastating impact on the opportunities for African American and Hispanic American borrowers to obtain access to mortgages.”
The FHC also has stated that it is not prepared to draw any conclusions about specific institutions based upon the testing evidence.
The mortgage-lending test was the first of three research projects the FHC is undertaking at the city’s request to examine impediments to fair housing in greater Grand Rapids.
The next two FHC projects will look at insurance redlining practices and Section 8 discrimination. Those projects will get underway soon, Davis said, and she expects it will be about a year before the results are available.
Joe Darden of Michigan State University, a nationally recognized authority on fair housing and urban affairs, also is conducting a comprehensive mortgage lending discrimination study for the city, Upton noted.
The city contracted with the FHC to do the study after a fair housing task force identified mortgage lending discrimination, insurance redlining, Section 8 discrimination and housing choices for the disabled as the four key issues needing further attention.
Upton pointed out that under the city’s investment policy, all financial institutions participating in the city’s investment program are evaluated in regard to whether their programs and practices promote equitable lending and workforce diversity.
The results of the mortgage lending study were released at the FHC’s annual luncheon this spring, which was attended by housing advocates, bankers, lawyers, real estate professionals, property managers, government representatives and civil rights advocates.
“The goal of this was to provide banks, mortgage companies and financial institutions with an opportunity to see what’s going in terms of the lending so they could take the report and go back and look at their own lending divisions and their own company practices to see whether or not there were any areas they needed to correct,” Upton explained.