- Originally published by the Chicago Sun Times on February 18, 2005 [here]
Copyright © The Sun-Times Company
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.