PHILADELPHIA – Jonathan Jacobs had almost no savings, a modest income and a credit report marred by a disputed cellphone bill. But he easily bought a newly renovated row house in Point Breeze, a South Philadelphia neighborhood that’s historically African American.
“It took about 15 minutes” to fill out the paperwork, the career counselor said. “Now I pay less to own a house than I did to rent an apartment. That’s the American dream.”
Jacobs, who is white, got a special home loan from New Jersey-based TD Bank that is designed to help low-income people and blighted neighborhoods, where banks are required to lend under the landmark Community Reinvestment Act of 1977. The law was designed to correct the damage of redlining, a now-illegal practice in which the government warned banks away from neighborhoods with high concentrations of immigrants and African Americans.
But the law didn’t anticipate a day when historically black neighborhoods would be sought out by young white homebuyers. So instead of lending to longtime black residents of Point Breeze, most of the loans there are going to white newcomers such as Jacobs.
The Community Reinvestment Act “is based on geography, so it’s perfectly possible to comply with CRA and have that pattern,” said Patricia McCoy, a law professor at Boston College who oversaw mortgage policy initiatives for the Consumer Financial Protection Bureau under President Barack Obama. “That’s not the idea, of course, but the law allows it.”
The result is nearly all financial institutions nationwide have passed their Community Reinvestment Act inspections since 2009, even though racial disparities in lending remain as pronounced as ever.
Reveal from The Center for Investigative Reporting analyzed 31 million mortgage records made available under the Home Mortgage Disclosure Act and found 61 metro areas across America where people of color – African Americans, Latinos, Asians and Native Americans – were denied conventional home purchase loans at significantly higher rates than whites. That was true even after controlling for nine economic and social factors, including applicants’ income, the size of the loan they sought and the neighborhood where they wanted to buy.
African Americans or Latinos were more likely to be turned away in major metropolitan areas such as Philadelphia, Detroit, Atlanta and Washington and smaller cities such as Iowa City, Iowa; Sumter, South Carolina; Tacoma, Washington; Vallejo, California; and Little Rock, Arkansas.