Why does Milwaukee continue to hold the distinction of being the nation’s most segregated city?
While it may seem there’s an obvious answer to that question, in truth that paradigm is more complicated than it appears on the surface—if it is indeed a problem.
Indeed, some would suggest a half-century after the legal barriers to housing and educational segregation have been eliminated; housing patterns today are determined as much by personal choices as racial impediments.
Different ethnicities gravitate to communities where they feel comfortable, as was illuminated in a national news article last year about local Black middle-class families with the means to move to the suburbs, but who chose instead to “live among our own.”
Poor credit and unstable income are also significant impediments in many cases.
But even those realities ignore the largest elephant in the room—mortgage redlining.
Haven’t heard that cancerous catchall in a while have you? I can relate since I haven’t written about housing or mortgage bias in a couple of decades.
In fact, while I understand racism will forever taint our society, I had assumed the Fair Housing Council would by this time require only part-time staff.
Unfortunately, that’s not the case.
For as examples of bigotry have given way in the media to other acts of racial profiling and racism, redlining and mortgage loan rejections continue to stagnate Black empowerment.
In fact, that thought came to mind a couple of months ago when I gave up hope of securing a consolidation loan after a full year of jumping through financial hoops.
My family credit is good; we have no defaults and always pay our bills on time. But after being strung along for months, and months, and months, we were finally notified our loan had been “deep-sixed” (a fancy way of saying “rejected!”).
Couldn’t be discrimination, I thought. But then I reread the results of a new research project that I had intended to write about several months ago.
The research clearly revealed that African Americans are rejected from securing loans at twice the rate of whites, which is consistent with our plight when seeking other types of loans and insurance.
In fact, according to the research project—“Racial Discrimination in Mortgage Lending: A Call for Transparency”—African Americans are disproportionately refused mortgage loans even when controlling for income.
Conducted by Eylul Tekin, a Ph.D. candidate at Washington University for Clever Real Estate, the shocking—albeit not surprising—research also revealed 52% of the rejected African American applicants were not provided with a reason for the rejection.
After scanning through the report and soliciting additional information, I could fill in that gap with one word.
Sadly, if you made the mistake of assuming prejudicial attitudes and actions have gone the way of Jesse Jackson’s Afro over the last few decades, guess again.
Quite the contrary.
In fact, you need but note the uptick of racial animosities since Donald the Trumpster took office to recognize that Rev. Al Sharpton will remain employed as America’s official tree shaker—at least until his processed hair returns to its natural, nappy state.
Tekin studied the records of 1.7 million mortgage applicants, 1.4 million of whom were White, compared to only 80,442 African Americans.
According to the report, “disparity between White and Black mortgage approval rates is most pronounced in the south; 89% of White applicants are approved in southern states, compared to 76% for African Americans.”
The West Coast has the lowest rejection rates for African Americans.
The worse states for mortgage rejections are Kansas, Mississippi, Louisiana, South Carolina, and Arkansas.
There were only four states where white applicants are denied at a higher rate than Africans Americans—Montana, Hawaii, Idaho, and Vermont—and there are only 12-20 Black folks living there.
In 2016 (the latest year for figures), only nine percent of White applicants were rejected, compared to 19% of Black applicants of comparable income.
While the rejection rate for Wisconsin was below the national average, that statistic, like most data on the state, is marred by the fact African Americans only make up 6% of the state population, with the overwhelming majority living in Milwaukee.
Thomas O’Shaughnessy, head researcher, revealed the rejection rate for Black Milwaukeeans was two percentage points higher than the national average.
On the bright/light/white side, it could be far worse, since the report showed only .05% of Black Milwaukeeans tried to secure a mortgage in the target year.
Another factor that impacts the viability of Black homeownership is that a much higher percentage of African Americans are steered toward higher interest rate mortgages—what I call the Rent-A-Center Mortgage division.
As the researchers noted from a study by the National Bureau of Economic Research: “African American and Hispanic mortgage applicants are, respectfully, 105% and 79% more likely to use high-cost mortgages for home purchases.
“High-cost home loans come with higher fees and interest rates, and, as a result, applicants are more likely to default on their mortgages.
“The study found that ‘differential exposure’ to high-risk lenders combined with ‘differential treatment’ by lenders explains most of the ethnic difference in high-cost mortgage lending.
“In other words, ‘African Americans and Hispanic borrowers are treated differently by borrowers and funneled to high-cost mortgages.’
“African American borrowers are also more likely to ‘receive subprime loans at higher costs, possibly contributing to higher foreclosure rates among these borrowers.’”
And while the report doesn’t succinctly put the blame for this travesty at the foot of racism, you can’t see the horned heads of disproportionately poor credit or debt to income ratios, because they are obscured by the mass of what appears to be a massive elephant in the room.
I say “assume” because, in over half of the reviewed rejection cases, the lenders didn’t report a reason for the rejection!
That loophole not only taints the study, but hinders remedies.
Unfortunately, the report does not list lenders, making it impossible to “boycott” them, or to minimally determine whether the problem is rooted in corporate policy, or who is sitting across from mortgage seekers during the application process.
It would also be interesting to see if there would be a reduction in the mortgage loan rejection rate if some non-biased factors were excluded from the process.
That, however, is not going to happen, primarily because while we pay taxes to run the government agencies that govern financial institutions, they, in turn, pay our politicians who write the regulations…in Latin and Greek.
As the report detailed:
“While this data would be valuable in assessing lender discrimination, there’s also the question of whether credit scores have inherent bias built into their scoring algorithms against people of color.
“Credit scores are a black box (their term, not mine) with hundreds of variables, and studies have shown that credit score algorithms have a disparate impact on people and communities of color.”
Obviously, we could make a stronger case for changes in the lending process if full disclosures were mandatory for rejected loans.
But as the report noted, “The American Bankers Associations want to keep credit scores and other important variables out of lender disclosures.”
That’s not surprising, nor is the fact that this may be the only medium you’ll find this report.
And if you think it’s irrelevant, think about this:
Homeownership not only makes African Americans stakeholders and property taxpayers, but is essential to stable neighborhoods, schools, and communities.
It’s not a coincidence that rental properties are not maintained as well, that neighborhoods deteriorate when they have an abundance of duplexes and that crime soars.
Civil rights were never about “giving” us anything, but merely equal access and opportunity. But that quest continues to be undermined as long as we are forced to wear tall boots to wade through the dung left by the big gray beast in the darkened room.