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A history of Redlining: housing group calls for more equitable mortgage lending practices

North Buffalo homes in the Delaware District
North Buffalo homes in the Delaware District

A recent investigation by New York State into mortgage lending practices highlights the continued problems of housing segregation in the Buffalo metro area. Governor Andrew Cuomo is proposing policies to expand home ownership in majority-minority neighborhoods, but members of a local home ownership equity group said the state’s recommendations fall short.

The report from the state’s Department of Financial Services (D.F.S.) found a lack of lending in majority-minority communities by banking and nonbanking lenders alike. The report states this has led to an increasing wealth gap between those neighborhoods and majority-white neighborhoods.

Deanna Eason is the Executive Director of Housing Opportunities Made Equal or H.O.M.E., a fair housing civil rights agency. She said the findings of the state’s investigation come as no surprise.

“It’s good that they said that this is a problem and this has to be a problem in Buffalo because of the statistics regarding Buffalo being so segregated,” Eason said. “So, I’m glad that it was looked into. So it’s meaningful? Yes. Big shock to us? Not at all.”

And Eason is right. A ranking by think tank City Observatory placed Buffalo at number four among the most segregated urban communities in the country, based on the U.S. Census Bureau’s American Community Survey through 2018.

The D.F.S. report recommends the state take legislative action requiring non-bank lenders to comply with the Community Reinvestment Act, a federal law designed to spur banks and savings associations to meet the needs of moderate and low-income communities. The report also recommends, that as federally-regulated institutions, non-bank lenders undergo an examination of their fair lending practices by both the U.S. Comptroller of Currency and the U.S. Consumer Financial Protection Bureau.

These measures, the report said, will help to close the widening wealth gap in Buffalo. But are there teeth behind the measures?

Eason cited a D.F.S. investigation into Hunt Mortgage which found no evidence of intentional discrimination or violation of fair lending laws, as an example of the state siding with lenders and their poor records of doing business in communities of color.

“I think one of the greater issues before the recommendations is,” she said. “Is it better to be discriminated against based on your race/color or just to be ignored totally, and not acknowledged at all. Because that’s what this mortgage company has admitted to doing.”

H.O.M.E. Director of Investigations Chris Allaire said getting lenders to take that approach would help nullify the institutional racism he said has been a part of the banking industry since its inception.

“That’s a real issue,” Allaire said. “Unbanked minority communities often don’t have the access to technologies to get them mortgages online that some other people have. I’m talking particularly about having bank branches in some of these areas could really help get these populations banked.”

It is possible, said H.O.M.E. Education Specialist Steven Haagsma, for lenders to turn that perceived weakness into a strength. But it may take a bit of government enforcement.

“Evans Bank, in the past 10 years, was the subject of a redlining lawsuit and now in this report,” he said. “They and 5 Star Bank, who was also under a similar agreement, they are now the examples of organizations that are doing it the right way.”

The success of Evans Bank and 5 Star, the report says, was influenced by each bank having been required to remediate fair lending violations.”

“And that turnaround has happened within 7 or 8 years,” he said. “And it’s happened because the government specifically looked at those institutions and said you need to do better.”

Doing better going forward, Haagsma said, could mean favorable consideration of a person’s previous rental history when they apply for a mortgage.

Allaire said another solution is for the C.R.A. to be more community-focused by working with local housing organizations to channel funding to resource deprived areas.

Whichever action is taken Eason, Allaire and Haagsma agree it needs to come immediately. They see the state recommendations as just a start.

Read the Department of Financial Services full report here.

Born in Louisville, Kentucky, Thomas moved to Western New York at the age of 14. A graduate of Buffalo State College, he majored in Communications Studies and was part of the sports staff for WBNY. When not following his beloved University of Kentucky Wildcats and Boston Red Sox, Thomas enjoys coaching youth basketball, reading Tolkien novels and seeing live music.
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