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The worst part? This is far from the first time something like this has happened.
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Getting a mortgage can be challenging, given that lenders have tightened up their standards significantly in the wake of the 2008 real estate crisis. But there’s a difference between employing strict lending practices and being downright discriminatory. And one major mortgage lender is being accused of the latter.
KeyBank is said to have underserved Black borrowers in the Philadelphia region, according to a new report from the National Community Reinvestment Coalition. Last year, only 2.2% of the more than 1,2000 mortgages it approved in that area went to Black borrowers. By contrast, other top banks in the area reported that more than 8% of their loans went to Black home buyers.
Now clearly, 8% is still a fairly small percentage. But Philadelphia saw a substantial decline in KeyBank loans to Black home buyers between 2018 and 2021.
Not surprisingly, KeyBank has pushed back against this accusation, saying it strongly disagrees with the characterization of its lending practices. But all told, it’s unfortunately not shocking to see an extremely low percentage of mortgages allocated to Black home buyers.
In fact, Black borrowers have long faced challenges when it comes to mortgage approval. And until lawmakers take meaningful action, that struggle is, unfortunately, apt to continue.
A major ongoing problem
Black mortgage applicants in the U.S. are more than twice as likely to be denied a home loan as white applicants, according to the National Association of Real Estate Brokers. These days, 15% of Black mortgage applicants face rejection, compared to only 6% of applicants who are white.
It’s not surprising, then, that only about 45% of Black households own their own homes. By contrast, 74% of white households own homes.
That’s a problem, because homeownership is said to lend to financial stability. Those who own homes can build equity that can serve as a financial safety net. And they’re privy to tax benefits that renters can’t capitalize on.
It’s also upsetting to learn that the gap in homeownership rates between Black and white households has widened over time. In 1970, it was 24%. Now, it’s 30%.
Lawmakers need to get involved
As part of his campaign pledge, President Biden promised to take steps to combat discriminatory practices in the mortgage lending industry. And in October, the Justice Department announced a nationwide initiative to tackle that issue.
Authorities across the country will be partnering with banking and consumer regulatory groups, including the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency, which monitors national banks, to track lending practices. There are several fair lending probes open already, and more are expected to come down the pike.
Thankfully, this initiative is already producing results. It’s already led to an $8.85 million settlement on the part of Tennessee’s TrustMark National Bank, which the government said avoided offering mortgages in predominantly Black and Hispanic neighborhoods.
Ideally, more work will be done to help ensure that lenders give out mortgages in an equitable fashion. That could help bridge the homeownership gap and help Black households attain more long-term financial security.
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