Illinois lawmakers heard hours of testimony from nonprofit, housing and bank officials Thursday on how to end racial disparities in mortgages.
The hearing was called by the Illinois Black Legislative Caucus and was rushed by WBEZ and city office reports that revealed large racial disparities in mortgage lending between Chicago’s white communities and the city’s black and Latino neighborhoods.
WBEZ found that for every dollar that lenders gave to buy a home in Chicago’s white neighborhoods, they only invested 13 cents in Latino neighborhoods and 12 cents in black city neighborhoods. The disparities were even greater among some of the city’s top lenders, according to the survey.
State Senator Jacqueline Collins, who represents parts of the south side of the city and the southern suburbs, said the hearing was intended to lay the groundwork for future changes in law or policy to address the disparities.
Collins, who chairs the state Senate’s Financial Institutions Committee, said lawmakers wanted to explore ways the state can encourage fair and just lending practices that bring capital investment to black neighborhoods and latinos.
“We want to see a loan market where running is not the biggest predictor of mortgage approval,” Collins said.
“Ultimately we want to see the end of the divestment cycle, which is at the very root of generational poverty here in Chicago and across the state,” she added. “The answers to how we do this will ultimately have to come from the banking institutions themselves… as well as the mortgage lenders.”
Collins said she invited a dozen lenders to testify at the virtual hearing, but only a representative from JPMorgan Chase was required to.
Cerita Battles, manager of affordable loans at Chase, said her bank analyzed loan results in Chicago even before reports from WBEZ and the city office showed Chase had the biggest racial disparities in loan lending. all major lenders in Chicago from 2012 to 2018.
Battles said the internal review prompted the bank to step up its lending, and she said recently released government data shows Chase is now the largest lender – both in number of loans and in dollars loaned – in black communities in the Chicago metro area.
She noted that in the years reviewed by WBEZ, 52% of home purchases in black communities involved no financing. And of home purchases that involved mortgages, Battles said a third were FHA loans. Chase and others banks have moved away from FHA loans in recent years, after being fined and arguing with the federal government over regulations.
Last week, Chase announced he would be directing $ 600 million more in mortgages to black and Latin families in Chicago over the next five years to make up for the lack of loans in those communities. This pledge is part of a $ 30 billion company commitment to close the country’s racial wealth gap.
Bank of America, Wells Fargo, Fifth Third Bank, US Bank and Citi sent written testimonies in which they extolled their companies’ commitments to social and economic equity and highlighted efforts such as aid programs. down payment or community revitalization projects.
A representative from the Illinois Bankers Association testified on their behalf, highlighting the billions of dollars these companies have spent in recent years on social justice initiatives, career development opportunities, internal diversity and inclusion efforts. and assistance programs for the underbanked.
“We are extremely proud of the long-standing and recently strengthened commitments of our members to economic equity. But we recognize that there is still work to be done, ”said Ben Jackson, vice president of the Illinois Bankers Association. “Disparities in access to mortgages are a persistent problem. These disparities create a barrier to financial security and wealth creation for communities of color, especially black people in Illinois. “
He said national data suggested there had been marginal improvements last year in lending to black and Latino homebuyers.
Lawmakers have asked bank officials how they can ensure that banks will lend fairly.
“Given the history – from redlining to shady mortgages and the Great Recession to these lending disparities – how can we trust our financial institutions?” asked State Senator Robert Peters.
Jackson said recent commitments from lenders should inspire more confidence. He said he saw an agreement between activists and the banking industry on strategies that could improve mortgage lending to black and Latin American communities, including adopting alternatives to credit scores, increasing down payment assistance for homebuyers – both public sector and private banks – and reforms. around the valuation of the property.
Nonprofits and community activists have shared a host of ideas the state and lenders should pursue.
They called on banks to offer matching savings programs, a significant increase in down payment assistance, an expansion of community credit unions and more diversity in underwriting – so those who take decisions about loans come from the communities they serve.
Activists called on state officials to enact a state-level effort – something stricter than the federal community reinvestment law – requiring banks to lend in underserved communities, and to revise the current “racist” rating system that values homes in black areas at a fraction of what those homes are worth if they were in white neighborhoods.
Asiaha Butler, president of the Resident Association of Greater Englewood, has suggested a new Homestead Act for African Americans to buy property in black communities.
“It’s going to have to be something very radical. It’s going to have to be something very innovative, ”said Butler, who added that his community is still grappling with population loss, foreclosures and abandoned buildings owned by the bank.
Sheila Sutton, housing policy organizer at Housing Action Illinois, one of the groups invited to testify, said she appreciated the banks’ commitments to down payment assistance and loan increases. “But these answers do not correct the systemic racism in our lending and homeownership landscape, which has deeply hurt black and brown communities, and their ability to build wealth and share the American Dream,” Sutton said.
She said her organization wants to see state regulations and laws that “mirror and deepen” federal requirements that banks lend in all communities.
Linda Lutton covers Chicago neighborhoods for WBEZ. To pursue @lindalutton.