Pennsylvania Attorney General Josh Shapiro launched a fresh push in his investigation of modern-day redlining Tuesday, calling on home loan applicants in Philadelphia to file complaints with his office if they believe they have faced discrimination or experienced irregularities when trying to take out a mortgage.
“Redlining represents institutional racism,” he said. “It sets city blocks and whole neighborhoods back. … We need to hear from consumers who believe they’ve been victimized in the home lending and banking industries so we can hold those responsible accountable.”
Pennsylvania is one of five states, along with the District of Columbia, whose attorneys general have launched investigations following a February expose from Reveal from The Center for Investigative Reporting. We found that in 61 cities – including Atlanta, Detroit and Washington, D.C. – people of color were far more likely to be turned down for a home loan than their white counterparts. This troubling pattern of denial occurred even when people of color made the same amount of money as whites, tried to take out the same size loan, and buy in the same neighborhood.
The report drew strong condemnations in Washington. “Racial discrimination in mortgage lending and in any kind of lending is unacceptable,” Jerome Powell, the chairman of the Federal Reserve, told a House committee. “Wherever we have authority, we will use it to stop that from happening and punish it when it does happen.”
Lawmakers took to the floors of the House and Senate to condemn the practice, with Sen. Elizabeth Warren, D-Mass., ultimately introducing legislation to beef up the 1977 Community Reinvestment Act, a loophole-filled law designed to fight redlining, and offering billions of dollars in down-payment subsidies to communities affected by the practice.
But with President Donald Trump widely seen as hostile to any type of consumer protections, progress at the federal level appears unlikely.
When Sen. Bob Casey, a Democrat from Pennsylvania, wrote Attorney General Jeff Sessions in March asking that Reveal’s findings “be completely and fully investigated,” the Justice Department did not respond. However, across the country, officials have picked up the torch at the state and local levels. The response has been greatest in Philadelphia, the city most prominently featured in the Reveal report, where lawmakers, community activists and lenders have all responded.
On Oct. 9, more than 300 of them gathered at a hotel in the colonial quarter of Philadelphia, a short walk from the spot where the U.S. Constitution was signed, for an all-day summit organized by the National Community Reinvestment Coalition.
Here’s where things stand when it comes to addressing redlining:
The Pennsylvania attorney general’s investigation is ongoing
Pennsylvania Attorney General Josh Shapiro was the first state attorney general to launch an investigation following our report.
In his remarks at the reinvestment forum in Philadelphia, Shapiro declined to detail where the ongoing investigation stands, but reiterated he found the substance of Reveal’s report “disgusting.” Shapiro added that it had been assigned to his office’s civil rights section and Bureau of Consumer Protection, which is also investigating data breaches at the credit bureau Equifax.
Consumers who believe they may be the victim of mortgage discrimination are urged to email email@example.com or call the office’s civil rights section at 717-787-0882.
A package of state legislation
Pennsylvania state Sen. Vincent Hughes is preparing a comprehensive package of legislation designed to fight redlining to be introduced when the Legislature convenes in January.
“Big problems need big solutions,” he told the redlining summit. “We have to aim high.”
His package includes three initiatives: a Pennsylvania Community Reinvestment Act, a Pennsylvania State Bank and a Pennsylvania State Credit Bureau.
The Pennsylvania Community Reinvestment Act would close many of the loopholes that Reveal exposed in the federal law. It would be “a law that has teeth to hold people accountable,” he said. The act would extend community lending requirements to credit unions and potentially nonbank mortgage lenders, including Quicken Loans.
Federal law is race-neutral and allows banks to claim community investment credit for lending to white borrowers in rapidly gentrifying neighborhoods. The proposed Pennsylvania law would evaluate the racial breakdown of credit extended by each mortgage lender to make sure they are not excluding any groups. If the law passes, Pennsylvania would become the first state to have a Community Reinvestment Act that tracks banks’ lending performance by race. Massachusetts, New York and Connecticut already have state CRA statutes, but they are race-neutral.
The Pennsylvania State Bank would serve as the primary depository institution for the commonwealth’s money, with savings or revenue set aside for low-income housing programs.
“You’ve got to put the money somewhere, why not put it somewhere where you have some control over it,” Hughes said.
Only one state, North Dakota, currently has a state bank, but the concept has become popular in activist circles nationally. Voters in Los Angeles will decide next month whether to create a city-owned public bank.
The Pennsylvania State Credit Bureau would act as an alternative to the three major private credit bureaus and address problems with scoring practices that disadvantage people of color. For example, on-time payments on expenses such as rent and utilities are ignored, while missed and late payments on those same bills can damage someone’s score.
Under Hughes’ plan, mortgages based on a credit score generated from private bureaus not following the Pennsylvania criteria would not be able to be filed with the recorder of deeds.
The state treasurer is still investigating
Pennsylvania Treasurer Joe Torsella has launched an inquiry into three financial institutions that do business with the state – Wells Fargo, Santander Bank and PNC Financial Services – which the treasurer noted “have been identified in a recent analysis by The Center for Investigative Reporting that identified lending disparities within racial and ethnic groups.” The banks deny allegations of discrimination and have responded to the treasurer’s initial queries. The investigation is ongoing.
Failing the creation of a public bank, Hughes said he would like to create investment tests for banks that take government deposits. “If they hold our money, they should have to prove they are not discriminatory,” he said.
Millions for down-payment assistance
On Oct. 4, the Philadelphia City Council passed a $100 million affordable housing package that includes set-asides to help first-time homebuyers and longtime residents seeking home improvement loans to maintain their properties. The appropriation was the latest action to come out of a hearing the City Council held in March to generate solutions to the redlining exposed by Reveal.
“It’s a tale of two cities to be quite frank with you,” said Councilman Kenyatta Johnson, whose district includes Point Breeze, a rapidly gentrifying section of the city where the vast majority of home loans went to white borrowers. At the same time, most of the applications from African Americans there were denied.
A partnership to stop wrongful mortgage denials
Since the hearing, politicians, community groups and financial institutions have been meeting to advance some of the proposals. On April 30, 11 major banks – including Wells Fargo, JPMorgan Chase and TD Bank – met with city leaders to discuss the revival of the Philadelphia Mortgage Plan, a public-private partnership that existed between 1975 and 1998 and encouraged lenders to make loans to people of color in low-income areas.
Over 23 years, it financed 28,000 mortgages. Its pillars included more flexible lending criteria to borrowers in blighted neighborhoods and a second review of applications slated for rejection. The City Council is also exploring how to craft stronger fair lending standards, which banks would have to meet before receiving government deposits.
JPMorgan Chase opens branches, will follow the Community Reinvestment Act
In February, we reported that America’s biggest bank, JPMorgan Chase, had sidestepped enforcement under the Community Reinvestment Act by maintaining a “private bank” office for the wealthy in Philadelphia, but not a deposit-taking branch for the public, which would have triggered oversight under the law.
After the story ran, the bank filed paperwork to open four branches in the city. In September, JPMorgan Chase President and CEO Jamie Dimon visited Philadelphia to announce a grant to community organizations in Kensington, a primarily Latino neighborhood. According to KYW Newsradio, Dimon said the bank was committed to opening 50 branches in greater Philadelphia, and with it, about 300 new jobs.
“We just gotta go back a little bit to the good ol’ can-do, get-it-done American way,” he said.
The Philadelphia announcement comes after Chase pledged a major expansion in Washington, D.C., following a report from Reveal that the bank had evaded enforcement under the Community Reinvestment Act. The report detailed how Chase had overwhelmingly helped white homebuyers in the nation’s capital, while denying prospective black and Latino homebuyers at higher rates.
A big bank opens a branch in a nonwhite neighborhood
In our February report, we noted that African American and Latino borrowers were more likely to get turned down by New Jersey-based TD Bank than by any other major mortgage lender. The bank turned down 54 percent of black homebuyers and 45 percent of Latino homebuyers, more than three times the industry averages. The following week, the county executive in Ulster County, in upstate New York, ordered $10 million in county funds be moved out of the bank.
“We take very serious the issues of discrimination and redlining, and we are committed to socially responsible business practices at all times,” County Executive Michael Hein told the Daily Freeman. “When we are made aware of something of this magnitude, I take action. I believe the people of Ulster County deserve nothing less.”
In Philadelphia, we reported that TD Bank had developed a special, low down-payment loan for people moving into formerly blighted neighborhoods, but appeared to target it primarily to white borrowers. It had 33 branches in the Philadelphia metro, none in a majority African American neighborhood. The day after the story ran, TD Bank filed paperwork with the federal government to open a new branch in Philadelphia’s West Kensington neighborhood, which census records show is 70 percent Latino and 26 percent African American.
Warren Buffett’s mortgage company starts reaching out to people of color
In May we reported how a national network of mortgage companies controlled by Warren Buffett’s Berkshire Hathaway engaged in business practices that appeared to target white borrowers while leaving out people of color. In Philadelphia, for example, Berkshire affiliate Trident Mortgage Co. employed a nearly all-white team of mortgage consultants. All of Trident’s offices were in white neighborhoods, and it made the overwhelming majority of its loans to white homebuyers.
Since then, Trident has taken steps to improve its image, hiring a director of community engagement who is African American. Community activists and real estate agents in formerly redlined neighborhoods have reached out to extend the company’s credit to people and neighborhoods the company did not serve before.
An uptick in grassroots activity
Reveal’s February investigation has led to a dramatic upsurge in community activity in Philadelphia. Angela McIver, director of the Fair Housing Rights Center in Southeastern Pennsylvania, has been screening a video version of our report in auditoriums around the city. The advocacy group One Pennsylvania has also been screening Reveal’s investigation in community forums.
In the blighted North Philadelphia neighborhood of Nicetown, where banks denied more home loans than they made, the head of the local Community Development Corporation, Majeedah Rashid, said she has been using the reporting to bring lenders to the table.
“We have already been talking to lenders that will fund our Homebuyers Clubs, where we intend to step up the game with more six-week sessions,” she said. “Empowering potential homebuyers to successfully purchase a home is our vision.”
Housing preservation, through easier access to home improvement loans, was also a priority. “All your hard work has opened the floodgates for change,” she wrote.