More evidence of discrimination in mortgages by race and ethnicity

The Center for Investigate Reporting went through 31 million records created by the Home Mortgage Disclosure Act and found disparities:

The analysis – independently reviewed and confirmed by The Associated Press – showed black applicants were turned away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three. In Washington, D.C., the nation’s capital, Reveal found all four groups were significantly more likely to be denied a home loan than whites.

Reveal’s analysis included all records publicly available under the Home Mortgage Disclosure Act, covering nearly every time an American tried to buy a home with a conventional mortgage in 2015 and 2016. It controlled for nine economic and social factors, including an applicant’s income, the amount of the loan, the ratio of the size of the loan to the applicant’s income and the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property.

Credit score was not included because that information is not publicly available. That’s because lenders have deflected attempts to force them to report that data to the government, arguing it would not be useful in identifying discrimination. 

This is an ongoing pattern. While I was in graduate school, I had a little experience working with the millions of HMDA records since my advisor, Rich Williams, had published on the topic. For example, see his 2005 article in Social Problems.

And lest we think that this is just about applicants of different races or ethnicities with equal standing receiving different treatment (generally the point of audit studies), it was even worse before the housing bubble burst:

In 2006, at the height of the boom, black and Hispanic families making more than $200,000 a year were more likely on average to be given a subprime loan than a white family making less than $30,000 a year…

Relative to comparable white applicants, and controlling for geographic factors, blacks were 2.8 times more likely to be denied for a loan, and Latinos were two times more likely. When they were approved, blacks and Latinos were 2.4 times more likely to receive a subprime loan than white applicants. The higher up the income ladder you compare white applicants and minorities, the wider this subprime disparity grows.

Or another study:

According to the study’s authors, the economists Patrick Bayer, Fernando Ferreira, and Stephen L. Ross, race and ethnicity were among two of the key factors that determined whether or not a borrower would end up with a high-cost loan, when all other variables were held equal. According to them, even after controlling for general risk considerations, such as credit score, loan-to-value ratio, subordinate liens, and debt-to-income ratios, Hispanic Americans are 78 percent more likely to be given a high-cost mortgage, and black Americans are 105 percent more likely.

Or see the $175 million fine leveled at Wells Fargo for steering minorities to worse loans.

This reminds of the conclusion of American Apartheid where the sociologists Doug Massey and Nancy Denton argue that Americans lack the will to enforce existing laws about housing discrimination. Even with a variety of laws and regulations intended to eliminate discrimination in housing, there is not a completely level playing level field.

Miami in front of the Supreme Court arguing for damages due to subprime loans

The Supreme Court just heard a case presented by the city of Miami that they should receive monies from banks because of the subprime loan crisis:

The story begins, Rugh said, in the late 1990s, when banks began marketing high-risk, high-fee home loans to black and Latino borrowers, especially those living in segregated neighborhoods. In a study published in 2015, Rugh and his co-authors examined 3,027 home loans in Baltimore (one of the few cities that has successfully settled a Fair Housing Act lawsuit against a bank) made between 2000 and 2008.When they controlled for basic loan characteristics such as credit score, down payment, and income, they found that black borrowers were channeled into higher-risk, higher-fee loans than were white borrowers with similar credit histories. These findings were compounded for black borrowers living in predominantly black neighborhoods: The study found that relative to comparable white borrowers, the average black borrower in Baltimore paid an estimated $1,739 in excess mortgage payments from the time the loan was made, a figure that was even higher for black borrowers in black neighborhoods…

In an amicus brief filed in support of Miami, a group of housing scholars argued that there is a direct link between the harm to borrowers documented by people such as Rugh and financial losses incurred by cities. Citing more than a decade of economic and sociological research from a variety of sources, Justin Steil, a professor of law and urban planning at MIT and one of the authors of the brief, explained, “the data is well established that foreclosures do lead to decreases in neighboring property values, which then lead to decreases in city revenues. Foreclosures,” he added, “also lead to more expenditures by the city in re-securing those properties, dealing with the vandalism, squatting, fires. And if the neighborhoods don’t recover, it just remains an ongoing problem for those communities to deal with.”

Supporters of the banks in this case say that if anything, leaders of cities like Miami encouraged the influx of credit into their municipalities. “I really think Miami wants to have this both ways,” said Mark Calabria, director of financial regulation studies at the Cato Institute. “If the banks weren’t doing business in Miami, they’d have a problem with that. It’s hard for me to believe that Miami would have been better off if Bank of America and Wells Fargo hadn’t been there.”

There are a lot of interesting aspects of this case, including the question of whether cities were harmed by loans made to individuals. But, there is little question in the sociological and additional social sciences literature: minority borrowers were steered toward loans with worse terms. (And other research suggests these worse terms for minorities extends to other areas including car loans and rental housing.)

Let’s say the court case goes in Miami’s favor and they receive some money. Two questions: (1) what do they do with this money? (2) What responsibility does the city have for not combating these loans in the first place and what are they responsible forward regarding disadvantaged neighborhoods? I hope one of the outcomes of this effort is not that cities can punt on their own policies and solely blame banks.

Real estate agents and steering today

Many real estate agents today won’t answer certain questions but does this eliminate steering?

Agents such as Foster and Thakkar are hypersensitive because they don’t want to run afoul of the Fair Housing Act, which prohibits discrimination on the basis of race, color, religion, gender, national origin, familial status, disability or handicap. The law is administered by the Department of Housing and Urban Development. Penalties for violating fair housing rules can be costly, so many real estate brokerage firms train agents on what constitutes “steering” of homebuyer clients as well as what could be interpreted as showing any form of bias against any “protected class.”

What can agents do when clients ask certain questions? Here are several of the examples provided:

“We can’t answer,” Foster said. “It’s all too subjective.” Instead, she refers them to online information sources about whatever they’re asking — websites that rate schools, statistical compilations on crime rates and the like…

“It’s a very common question,” he says: “Can you tell us how many other Indian families live on this street?” Even though he thinks he understands the thrust of the question — are there people like us around? — he declines to answer directly. Instead, he supplies them a list of the names of current owners on the street, allowing his clients to decide for themselves whether the names indicate that they are Indian or not.

Referring people to other sources may lead to issues:

But some fair housing advocates are concerned that the online information available today may actually enable a subtle form of racial steering when agents name specific sites that offer highly localized racial and ethnic breakdowns and refer clients to them. Lisa Rice, executive vice president of the National Fair Housing Alliance, a nonprofit group that has fielded teams of white and minority “testers” to detect bias in homes sales, thinks that in the event of fair housing complaints against those agents, the fact that they made such specific referrals could be held against them.

It seems to me that one of the best ways to eliminate this issue is to educate homeowners about all the potential information they can access. Stop them from asking in the first place. Realtors could even make this clear at the beginning. The Internet certainly presents a lot of available information to possible home buyers ranging from the Census to other data aggregators to message boards to municipal websites. In other words, it is not hard to find out this sort of information. Yet, this would go against the argument that realtors make about why they are still necessary: they have inside information about the home and the entire process. Additionally, all the online information is not necessarily easy to interpret. Say a homeowner is interested in future property values: can they make a prediction based on what is online? Or, say that an online message board suggests one thing is happening while the local newspaper claim something else is taking place. How could someone unfamiliar with the area make a judgment regarding conflicting information?

In the long run, if people want to fight residential segregation and housing discrimination (which are legitimate concerns), would it be better to remove real estate agents from the process or not?

Federal judge reverses DuPage County, says Islamic worship center can go forward near Naperville

A federal judge says an Islamic worship center can locate just outside of Naperville:

The Irshad Learning Center had sought to open a worship center for up to 100 people inside a single-family home at 25W030 75th St. that had been previously used as a private school.

In 2010, the county board voted 10-7 to deny its application for a conditional use permit after some neighbors complained their property values would go down.

Irshad, which has about 75 members, filed a lawsuit challenging the decision on grounds ranging from religious discrimination to the county’s alleged violations of its own zoning laws.

Judge Rebecca Pallmeyer found in a 70-page ruling there was no “direct evidence of deliberate discrimination” by the county or its workers, though she noted that a zoning board of appeals member had asked the group’s attorney if animal sacrifices would be held.

But she did find that DuPage County’s “repeated errors, speculation and refusal to impose conditions” under which the project could be approved led her to conclude that the county had wrongly imposed a “substantial burden” on the group’s application and that its denial was “arbitrary and capricious.”

A few cases like this in the Chicago area in recent years have generated controversy (see here, here, and here). Now it remains to be seen how neighbors respond once the Islamic Center is open.

More evidence of a racist North: disparities in incarceration rates by race existed in late 1800s

There is a disparity across racial groups in incarceration rates in the United States today. But this is not a recent phenomenon: a recently published sociological study argues this dates back to the late 1800s.

Since 1970, the percentage of Americans in prison has skyrocketed; the incarceration rate is especially pronounced among blacks. Though it’s often assumed that the racial disparity came along with the surge in incarceration, a recent study by a sociologist at Harvard suggests that the disparity originated earlier, with the emigration of blacks from the South. Not only was the racial disparity in incarceration higher in the North to begin with, but it rose sharply in the North after 1880, even while dropping sharply in the South after 1900. What exacerbated the racial disparity in the North was the fact that blacks were competing with lower-class immigrants from Europe, many of whom—particularly the Irish—had come to dominate law enforcement and were looking for any excuse to arrest blacks. In a sense, the Irish—who, ironically, had gotten a reputation as troublemakers when they first immigrated—traded places with blacks. “As the incarceration rate of Irish immigrants and their children in Great Migration states declined from 245 to 158 people per 100,000 between 1880 and 1950, the nonwhite incarceration rate leapt from 203 to 594.”

Muller, C., “Northward Migration and the Rise of Racial Disparity in American Incarceration, 1880–1950,” American Journal of Sociology (September 2012).

This is more evidence that the North has had a long history of issues over race after the Civil War. The typical narrative often doesn’t allow for this; the story often goes that the South was the racist and discriminatory part of the country and the Jim Crow laws prove this. But the North may not have been much better. In addition to these differences in incarceration rates, there is evidence of:

1. Increasing levels of residential segregation between whites and blacks emerging in many Northern cities in the early 1900s. As the Great Migration picked up, blacks were pushed to live in black areas, not in white neighborhoods. For example, the thousands upon thousands of blacks who entered the city were forced into the Black Belt. See the book American Apartheid, among other research.

2. Many smaller Northern communities had “sundown laws” that did not allow blacks to stay in the community after dark. While blacks had unprecedented residential mobility in the two decades after the Civil War, these new sundown rules pushed blacks back into major cities. See the book Sundown Towns.

Wells Fargo pays more than $175 million to settle case of steering minorities to worse mortgages

This is part of what discrimination looks like today: Wells Fargo has just agreed to a big settlement for offering minorities worse terms on mortgages.

At least 34,000 African-American, Hispanic and other minority borrowers paid more for their mortgages or were steered into subprime loans when they could have qualified for better rates, according to the Department of Justice. The DOJ settled a fair-lending lawsuit with Wells Fargo, the nation’s largest mortgage lender, on Thursday…

The complaint also says that between 2004 and 2008, “highly qualified prime retail and wholesale applicants for Wells Fargo residential mortgage loans were more than four times as likely to receive a subprime loan if they were African-American and more than three times as likely if they were Hispanic than if they were white.”

During the same period, the complaint says, “borrowers with less favorable credit qualifications were more likely to receive prime loans if they were white than borrowers who were African-American or Hispanic.”

Wells will pay at least $175 million to settle the case; it denies any wrongdoing in settling. Bank of America agreed to pay $335 million in settling similar charges in December.

This is not unusual: audit studies have shown that minorities tend to have more difficulty renting, securing a car loan, getting a job, and getting mortgages compared to whites.

Even though I have looked at several news reports on this, here is what I really want to know: is this a large enough settlement for Wells Fargo to really care? In other words, is this a light fine or a heavy fine? And perhaps more importantly, how do we know that they and other banks won’t pursue similar tactics in the future?

Nearly half of American whites feel that discrimination against whites is similar to discrimination against minorities

Survey data from last year suggest that nearly 50% of whites feel that whites are discriminated against at similar rates to minorities:

Nearly half (46 percent) of Americans agree that discrimination against whites has become as big a problem as discrimination against blacks and other minorities. A slim majority (51 percent) disagree.

  • A slim majority of whites agree that discrimination against whites has become as big a problem as discrimination against minority groups, compared to only about 3-in-10 blacks and Hispanics who agree.
  • Approximately 6-in-10 Republicans and those identifying with the Tea Party agree that discrimination against whites is as big a problem as discrimination against minority groups.
  • Nearly 7-in-10 Americans who say they most trust Fox News say that discrimination against whites has become as big a problem as discrimination against blacks and other minorities. In stark contrast, less than 1-in-4 Americans who most trust public television for their news agree.

So what media you watch the most or political groups you identify with colors your perceptions of what racial groups suffer discrimination? Considering this, I wonder if most American whites could describe a situation where they have personally suffered racial discrimination or whether these data reflect larger perceptions about American society (“people out there are against us/taking our jobs/working the system”). I wish there were some follow-up questions here…

There is also some interesting data here on opinions of Muslims: Americans generally support religious freedom but aren’t as willing to extend this to Muslims.