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From the Business Section of the New York Times:
Study Strongly Links Baltimore Mortgage Denials to Race
By PETER EAVIS NOV. 16, 2015
The black population of Baltimore is double that of the white population. Yet in 2013, banks made more than twice as many mortgage loans to whites in the city as they did to blacks.
Baltimore blacks were long dogged by malicious stereotypes spread by The Wire, but their behavior in 2015 — first rioting, then murdering each other in large numbers — has demonstrated their financial trustworthiness. How delusionally racist are lenders to not see that houses in Baltimore black neighborhoods are sure bets?
The stark difference in mortgage lending, derived from the most recent government mortgage data, is the focus of a new study that will be released on Tuesday by the National Community Reinvestment Coalition, a consumer advocacy group.
Given that the government does not collect certain important types of data on borrowers, researchers have long found it difficult to determine the degree to which race affects mortgage lending.
Still, the coalition says its analysis shows that the racial makeup of a neighborhood — and not income, for instance — is the most significant predictor of whether a loan gets made in Baltimore.
Exploring the causes of the economic differences between blacks and whites in Baltimore has taken on an added urgency after the protests and riots in the city this year. The unrest followed the death in April of Freddie Gray, who died after suffering a spinal cord injury in police custody. Unemployment is higher than the national average in Baltimore, and particularly so among younger blacks in the city.
“If lenders are not making loans in a community, the opportunities for people to work their way out of poverty is pretty slim,” said John Taylor, the coalition’s president. “In Baltimore, the prevailing factor behind who gets a mortgage is the racial composition of the neighborhood.”
… Still, it has long been the case that the rate at which blacks get denied a mortgage is higher than that for whites. In 2013, for instance, blacks were denied on 25.5 percent of their applications for mortgages to purchase a home, compared with 12.2 percent for whites, according to an analysis of the government mortgage data by the Federal Reserve. The higher denial rate for blacks might, for instance, be explained by differences in credit history and the amount of money that borrowers can put down as a deposit.
Indeed, according to the Fed’s analysis of the government mortgage data from 2013, banks said credit history was the reason behind 30 percent of their denials of black borrowers. For whites, banks said it was the cause in 22.5 percent of the cases.
Still, the reasons for the high rate of denials remain murky.
Here’s a suggestion: the high rate of defaults by blacks.
As a result, questions will continue to hang over the high denial rate for blacks and the low level of lending in neighborhoods where blacks or other minorities are the majority. And these questions were in part behind the coalition’s analysis of Baltimore, a city that has in the past suffered from redlining — the term given to policies and practices that made it very difficult for blacks to obtain mortgages or take out home loans at the same terms as whites.
I’m fascinated by the lack of cognitive integration apparent these days. For example, like everybody else who reads the NYT, I watched The Wire. One obvious implication of the celebrated TV show is that you ought to be very cautious about lending money to homebuyers in that violent place. But nobody seems anymore able to perform elementary acts of mental integration of knowledge.
Likewise, everybody knows that the Foreclosure Crisis was hard on blacks. But nobody seems to know that that’s just another way of saying blacks defaulted on their debts a lot.