Chicago Blacks less likely to get loan than 10 years ago
/- Originally published by the Chicago Sun Times on February 18, 2005 [here]
BY MARY WISNIEWSKI Business Reporter
A new study by the Chicago Reporter shows that the chances of an African American getting a home loan in Chicago have gotten worse in the past 10 years.
According to an analysis of federal mortgage lending data, in 2003 just 48 percent of home loan applications from blacks resulted in mortgages, compared with 72 percent a decade earlier.
The study found that blacks were 2.5 times more likely than whites to be refused mortgages. Higher income doesn't always help -- whites earning less than $30,000 annually were slightly more likely to be approved for a loan than blacks earning more than $90,000.
Experts interviewed by the Reporter, a publication of the Community Renewal Society, point to an increase in predatory lending in black neighborhoods, the reluctance of mainstream lenders to extend loans in those areas and the lack of familiarity many African Americans have with the home buying process, which can lead to rushed decisions and poor choices.
"If conventional lenders won't make loans, the predatory lenders will step in," said Gail Parson, community reinvestment organizer with the National Training and Information Center, an advocacy group.
A predatory loan is one that costs more than a borrower can or should pay, and usually includes excessively high interest and fees.
The Reporter study found that blacks are nearly five times more likely than whites to apply for home loans through subprime lenders. Even blacks earning more than $90,000 a year chose subprime lenders 40 percent of the time.
Anne Arvia, president of ShoreBank, said the problems with mortgage lending are caused by lack of access to financial services in minority neighborhoods, and lack of knowledge about what's possible. She said some people choose subprime lenders because they want to hear "yes."
"There's an historical culture of mistrust of financial institutions from family members who have been told 'no' for a long time," Arvia said. "If you grow up in that environment, you might go to anybody who'll say 'yes' instead of reading the fine print."
Another problem is that credit reports sometimes work against minorities who, while they are good loan risks, might not have had a chance to build a credit record because of a lack of banking services in their area, Parson said.
