Lecture Notes: Discrimination in Mortgage Lending

Introduction

• Speaker: Judy Woodruff, Aaron Glantz
• Topic: Discrimination in mortgage lending, focusing on black and Latino homebuyers
• Context: 10 years since the economic recession; credit returns for most Americans, but disparities remain

Key Statistics

• Number of conventional mortgages rose 95% since the housing bust by 2016
• Gap between white and black homeownership is wider now than in 1960

Case Study: Rachelle Faroul's Experience

• Background: Brooklyn native, moved to Philadelphia in 2015
• Profession: Computer programmer
• Income: Adequate for down payment
• Lenders: Philadelphia Mortgage Advisors, Santander Bank
• Challenges:
  • Income considered unstable (contractor)
  • Mother's pension not enough due to student loan debt
  • Credit score dropped due to a single delinquent electric bill
• Suspicions: Believes race played a role in loan denial
• Strategy Shift: Asked girlfriend Hanako Franz to co-sign; successful despite Franz's unstable financial situation

Legal Background

• Fair Housing Act (1968): Illegal to discriminate based on race in housing
• Community Reinvestment Act (1977): Requires banks to lend to qualified low-income borrowers

Data Insights from Reveal

• Researcher: Emmanuel Martinez
• Analysis: Nearly 31 million mortgage records from 2015-2016
• Findings: Racial disparities in denial rates in 61 metros
• Example: Black applicants in Philadelphia are nearly 3x more likely to be denied
• Data Limitations: Banks don’t share credit scores, making complete analysis difficult

Perspectives and Opinions

• Mortgage Bankers Association: Claims Home Mortgage Disclosure Act data is insufficient for fair lending assessments
• American Bankers Association: Argues data lacks borrowers' credit history
• Sen. Tim Scott: Advocates for more data transparency and changes to how credit scores are calculated to avoid penalizing people of color

Systemic Issues and Solutions

• Hidden Discrimination: Ongoing issues despite legal protections
• Role of Credit Scores: Penalize people of color; proposed legislative fixes by Sen. Scott
• Community Impact: Neighborhoods with high minority populations receive fewer loans
• Regulatory Challenges: Nearly all banks receive satisfactory ratings under existing regulations, despite evidence of discrimination

Conclusion

• Outcome for Rachelle Faroul and Hanako Franz: Successfully purchased home but highlighted systemic barriers
• Sen. Tim Scott's View: Progress made but more needed
• Future Investigation: Part two focuses on gentrification and home equity loans

Next Steps

• Upcoming Topic: Impact of gentrification on longtime residents seeking home equity loans

Study Tips

• Focus on: Key statistics and legal background
• Understand: Specific cases like Rachelle Faroul's for real-world context
• Remember: Key researchers and their findings (e.g., Emmanuel Martinez)
• Reflect on: Systemic issues and proposed solutions by policymakers like Sen. Tim Scott