Banks Vowed To Help Black Homebuyers. What Happened?

own the home they live in. That, of course, is part of the long legacy of all kinds of racism and discrimination and employment the real estate market, and in decisions by banks about who they'll lend money to for a mortgage. You might remember a few years ago some of the country's biggest banks, Wells, Fargo, Bank of Americus and others, pledged to do something about that. They said they'd work hard to dramatically increase the number of mortgages

they extend to black homebuyers. So how did that work out? Bloomberg Senior economics writer Shawn dunne and set out to answer that question, and he's here with me now with Answers. Sean. Good to talk to you again. Wonderful to be here, Sean. The last time we talked on this show, you were explaining the importance of home ownership to getting into the

middle class and staying there. And now you're in our colleague and CHOI have written a big investigation that shows how difficult that can be and how sometimes that cards are stacked against people, especially Black Americans. Can you describe what she set out to find? What we set out to look at was some big promises that the three biggest banks in the mortgage market in America had made

to increase black homeownership. And the biggest of those promises was one made by Wells Fargo in when it promised to lend sixty billion dollars over the next decade to create two hundred and fifty thousand new black homeowners in America.

What we found when we looked at the data was that in every year since Wells Fargo had actually originated fewer mortgages to black home buyers than it did the year before, and that in one it actually underwrote fewer mortgages to black home buyers than it did in seventeen, the year that it made that promise. Now Wells Fargo isn't alone in making these big promises. JP Morgan promised in twenty to create forty thousand new Black and Latino

homeowners in America. Bank of America has made some similar big promises in terms of two separate fifteen billion dollar programs to help increase minority home ownership. They announced in August of this year that they were going to provide zero down mortgages in black minority communities in five cities in America as part of test program, again to try

and increase black home ownership. But those banks are all lending far less to black home buyers than they did a decade ago, or then they did more importantly at the peak in two thousand and seven on the cusp of the suppreme crisis. Today in America, those three banks originate fifty thousand were almost fifty thousand fewer mortgages each year to black home buyers than they did fifteen years ago.

And we looked at something called the Home Mortgage Disclosure Act data, which is every mortgage in America gets recorded and reported by the government anonymously. And what we zeroed in on is the role of the big three banks, the biggest bank lenders in the mortgage market, and that's Wells, Fargo, JP, Morgan, and Bank of America, and how that had changed in the last fifteen years. So despite the alledged to increase the number of black homeowners by issuing more mortgages to

black families seeking to buy homes. The numbers have actually gone down, yeah, and to the point where in twenty twenty one, Wells Fargo originated just thirty seven mortgages across the country to black homebuyers, and had they stuck with the goal, then it would have been it would have been twenty five thousand. Yet, and some of those would be mortgages that they bought from other lenders and so on.

There's other ways of doing it. But the point is the lending that their loan officers has been doing to black homebuyers is actually down from the time they made this big pledge. And it's a pledge that wasn't a kind of one time thing. It's something that they have repeated in their social progress reports as recently a September of this year, and it was a big, sixty billion dollar commitment that they were making and that they've continued

to repeat. And what they don't tell you is that actually their business reality is that lending to black homebuyers has gone in the opposite direction. So they're continuing to say that this is something that they're doing, except the number is sort of show otherwise. So I guess the question is why why have the numbers gone down despite very prominent pledges to increase the numbers. Look, it's something

that wells. Fargo, when we asked them this question, simply gave us a statement saying that they remain committed to increasing black home ownership in America and pointing to wider economic and social problems in America and laying the blame elsewhere. And JP Morgan and Bank of America both say they remain committed to their own goals, but that it just may take more time to meet them. Sean, your story focuses on one city block in Baltimore, which is emblematic

of the things you're describing there. Absolutely, So we set out to look at where in America we could tell the story, and we settled on the block of Wallbrook Avenue in West Baltimore. The twenty one block of Wallbrook Avenue is really interesting and that it's a place that has a history of black homeownership. It's a block of row houses, It's part of a black working class neighborhood that has actually seen some serious disinvestment over the last

fifteen or twenty years. Sprinkled among these homes that are still kept up well, that have tidy front lawns, that have longtime black homeowners living in them, are vacant lots. And one of the reasons for that is that, like a lot of neighborhoods in Baltimore, dominantly black neighborhods in Baltimore, the twenty block of Walbrook Avenue just saw an exit

of bank lending. Effectively, it became almost impossible in recent years to get a mortgage from a major bank to buy a property in a lot of neighborhoods in Baltimore. And you know, one of the people we talked to describes that as the cutting off of the capital artery to a lot of these communities. And that's something that has really been a legacy of the subprime crisis fifteen

years ago. But it's there today, and it's there in the market, and it's been one of the things that has really dragged down, you know, back to that middle class dream of the wealth of the families that live on these blocks, the longtime homeowners there, their homes are not worth what they were fifteen years ago in some cases, and that's largely as a result of the withdrawal of

bank capital from a lot of these neighborhoods. You talk about this bank withdrawal, and on this block in Baltimore, you see numerous examples of houses where the bank's essentially left. So we through the property records for each of the properties on the block. On the south side of the block, there are twenty three properties, but there's only one Wells Fargo mortgage left on the south side of the block.

What happened. Some of this is the result of people paying off their mortgages, people moving, people sawing, but a lot of it is the result of foreclosures. And we started zeroing in on the story of one particular house, the house at three Wallbrook Avenue, and that's where we met the Jones family. The story that we're told by Terence Jones Jr. Who was in high school at the time, is that he came home from high school one afternoon

and found his mother waiting outside. And his mother had been battling illness for a few years beforehand, and his father had as a result, been forced to cut back on his hours. They'd fallen behind on the mortgage. You know, it was a story that I think a lot of us can sympathize with. But as a result of falling behind, Wells Fargo foreclosed on the property and they lost their home.

And the legacy is not just in this family being dislocated and losing their home, it's also in how Terrence Jones Jr. Now an adult who is now in his twenties, thinks about homeownership. And I think that's something that's really interesting when you think about the future and closing that wealth cap and getting younger people on the housing ladder. And you spoke to him, Uh, let's listen to what

he had to say. You know, if a bank can be that heartless to families or hartness to a person, then you know, it just makes me don't even want to buy don't even want to buy a house, or I don't even wanna, you know, loan from the bank already just buy my house out on his own, because I don't kind of want to go through the same thing that my father went through and that my family went through with losing the house. It was just like

kind of like a traumatic experience. When we come back my conversation with Sean Dinna continues, Sean we heard Tamas Jones talking about his experience when his family's home was sport closed down, and it wasn't an unusual thing to happen now, So the story of the Jones family house doesn't end with the family being kicked out after the family was foreclosed on. The father had taken out a sixty five dollar mortgage in two thousand and three and that was what he fell behind on, and ten years

later they were kicked out of the house. A couple of years after they were kicked out of the house, well S Fargo sold the house for five dollars to an investor in Pennsylvania, who turned around and sold it a few months later for nine thousand dollars to another investor who then rehab the house and sold it last year late last year for almost ninety dollars. And you think about that, you talked to Terence Jones Jr. And what you see there is just the erosion of one

family's wealth, the missed opportunities. That house is going to continue to appreciate as an asset in the years to come. And that is an appreciation and that's wealth that the Jones family is going to miss out them Sean you've said that the banks are saying market conditions and other forces beyond their control are largely responsible for their inability to meet the promise of lending to more Black Americans.

What did you find when you talk about this with the banks, And the banks are incredibly sensitive about this issue. One of the things you run into very quickly is bankers blaming regulations and the regulatory environment and the crackdown

that followed subprime crisis Great Recession. And we know that a large part of the story of the collapse of the housing market at that time was the kind of reckless lending practices that that happened beforehand by a lot of these same banks, and that they faced consequences afterwards

for targeting minority neighborhoods. For you know, Baltimore was actually at the center of a series of lawsuits over reverse redlining, the actual targeting by Wells Fargo and other banks of black communities for high interest subprime loan and there was a huge settlement that was negotiated by the Department of Justice with Wells Fargo in and there were other banks

that faced fines as a result. So the cost of getting it wrong, the kind of regulatory costs is one of the things that banks point to, and yet they made the pledge to increase lending once these regulations were in place, So it wasn't as though they changed the rules of the game afterwards. They went into it knowing

that that's what the terms were. Absolutely, absolutely, And you know, as part of this reporting, we talked to a guy called Brad Blackwell, who was a senior executive at Wells Fargo at the time they came up with this goal, and he said, we saw a great opportunity in the black community in America, great business opportunity in terms of

the population growth. It was also the reality is mortgages in the white community, the home ownership rates something like pretty saturated, but there's a growth opportunity in Latino and Black neighborhoods to get back into lending there. Uh. There's also a social responsibility that he talked about, and that has become this pledge from all of the banks has really become part of their social policy. The kind of

E s G thing that we hear about. That's that environmental, social and governance is sort of being a better company by doing good. Yeah, it's corporate citizenship. So do you think that when they made these pledges at the time, they saw an opportunity to make it happen, that they did in good faith and then realized they'd made the wrong decision, or is this more of a social campaign

from the start. Look, it's really hard to make that judgment, and I have to believe as a reporter that these were good faith pledges at the time, and the banks certainly laid out strategies to get there. But you know, there's a structural problem in the way the business is done. What can be done? Because you said two things. One, the banks are not meeting their pledge to increase the

number of mortgages going to black home owners. And the second thing is that the banks themselves are not wanting to issue as many mortgages anyway because it's not such a good business as it used to be. Those two things together don't look like a great future for mortgages for people who are looking to get in the middle class. Yeah, and for the broader issue of closing the racial wealth gap in America. So what's taking its space? Because people

still want to buy homes. People are still buying homes even now where interest rates are high. It's more difficult, but people want to buy home. So who's lending. So the biggest mortgage lenders in America today are non bank lenders. And these are outfits like Rocket Mortgage, which used to be Quicken and they're now the largest. They are now

the largest mortgage lender in America. And just to give you an idea, they lent They originated more mortgages to black homebuyers in one than all three of the biggest banks combined. And so they know how to do this. Now, why let me just ask you, Like banks have been doing this for many, many years, it's obviously very profitable. Why is it that these other lenders are able to make a go of it in a way that we you know, seeming to be so profitable when the big

banks can't do it well? I mean, part of it is convenience. You know, you can apply for a Rocket mortgage on your phone. There's that online lending side of things. But part of it is also intentional marketing to some of these communities that the Rocket Mortgages and others aren't doing that perhaps the banks aren't so sean as usual, You've done a great job is spelling out a big problem. Where's the bright spot here? If there is one, where

is the solution? How does this get fixed? So there are some pretty obvious and fairly easy solutions to this, and one of the biggest ones that the people in the housing industry talk about is the positive sistants helping black home buyers come up with the deposit which is often the hardest thing for a family down payment on exactly the down payment on a mortgage, which can be anywhere from you know, three to of the cost of a house, because a lot of these families are paying

rent right and they can afford the monthly payment because ranked is often more expensive than a mortgage, and yet you don't build anything exactly. It's just that entry point that they struggle with. And so there have been some efforts by the banks to get into this area, but they've been hidden miss But one of the big ones that Wells Fargo engaged in was created by a twenty twelve settlement with the Department of Justice in which they were asked to come up with fifty million dollars to

do deposit assistance programs in eight cities, including Baltimore. One of the people we met was Nyamaka Odom who is twenty nine years old, and she bought a house in in East Baltimore and she was able to string to get a twenty nine thousand dollars in downpayment assistance. The biggest chunk of that was fifteen thousand dollars in a forgivable loan from Wells Fargo as part of this program, as part of this program, and it made all the difference,

and she walked us through the process. I met with my real Churn. She was like, you know, there are downpayment assistance programs, you know, let me introduce you to um Broke her at bb and T at the time Naturists, and she told me, yes, you can get a lot of aid based on the income amount that you make because there's certain income caps for certain programs. And so she told me about the Community Block Development program in Baltimore that she told me about the Baltimore Neighborhood and

then the other was through Federal Homebloan Bank. And so I ended up getting all of them, which is nice because the Baltimore Neighorhood lift one that was the last one I got, but it gave me fifteen thousand dollars um. The other programs of the Baltimore Community Block Program. That one I did have to do counseling force. I did online counseling talking about UM, the responsibilities of being a homeowner, what can happen foreclosure, and you know what to expect.

And so I did that counseling virtually and then I did in person counseling UM. Once I got certified for that, then they provided me the five thousand dollars of the down payment assistance. So there's what looks like a success story, maybe a path for others. How many other people have access to that? Is that something that's scalable where let's say Wells Fargo really embrace this, would they be able to come closer to meeting this big public goal that

they proposed. Absolutely, but it's something that comes and goes. So in Baltimore, over the last years, we were able to track down six hundred and eighty or so homeowners who received the assistance from Wells Fario, and we went through and looked at where that money went, and what we found was that only it roughly went into um majority black census tracks in Baltimore, and Baltimore is a

majority black city. So it's the money and you hear this a lot from folks who work in the fair housing world and advocacy groups, and that is that you really need to target that lending. Sean, when you look down the road, do you see this gap closing? I think they're really sad and frustrating. Reality is that we're going to go backwards for a few years. And that's the consequence of economic policy in the United States. It's a consequence of the Federal Reserve raising interest rates. Buying

houses is more spensive. You know, a lot of people who could afford a mortgage a few years ago aren't going to be able to afford that. We are going to go through some turmoil. Just a number of people buying homes in the next few years is just gonna be down substantially. And at the end of the day, closing that gap, it's a numbers game. It's a volume game.

You need to lend more to black home buyers so that more black home buyers can buy homes and that they are buying homes at a faster rate than the white population. And that gets into all sorts of other things, like how credit scores are assembled, like discrimination in terms of appraisals and black community. Is the willingness of banks to lend into some communities and places like the block of Walbrook Cabinet. This is not something that is going

to be solved tomorrow. I'm not sure it's something that's going to be solved ten years from now. But it's something that you need the big banks in America to live up to their promises to do. Sean Donnan, thanks so much for coming on the show. Thank you so much for having me. When we come back, we'll hear from someone who's working with banks and other lenders to try to do something about this problem. What more can be done to press lenders to narrow the home ownership gap.

Diedrich Assanti Mohammed spends a lot of time working to make that happen. He's Chief of Membership Policy and Equity at the National Community Reinvestment Coalition here in Washington, and he joins me now. Diedrich Sante Mohammed, thanks so much for being here. Yes, thank you for having me. First, let me ask you, what does the National Community Reinvestment

Coalition do well. We are an organization that really started off as a coalition around the Community Reinvestment Act and trying to make sure that the Community Reinvestment Act, you know, recognize that we don't need solely not discrimination, but we also needed to affirmatively further investment in housing by financial institutions and investment in general in order to help or move the country toward a more equitable society. And so

we pull together this coalition that today has grown. We have over seven hundred local organizations across the country that do different type of community economic development work. We work with banks and trying to help them point to them promising practices, best practices of investment into load of moderate income areas and how to help address the racial wealth divide. And that can take a kind of a host of

different programs and types of advocacy. And that's exactly what we're talking about today, which is promises that a lot of the biggest banks, lenders from mortgages made to increase the number of black homeowners by extending more loans than they have historically, and how some of those promises have

been broken. You authored a study that showed to boost black home ownership to over twenty years in the US would require a hundred and sixty five thousand mortgages a year above what was being lent out in Yes, that is correct, and we like to you know, know that's about increase. You know that we would look at for most financial institutions would need to do that in order

to collectively get to this level. And you know, I think, well, the reason we wanted to put these types of numbers out there is want to highlight the kind of radical change necessary in order to get to what really is a humble goal, because the homeownership rate for white Americans is seventy three, seventy, so we're not even talking about

get to equality with white Americans. We're just kind of trying to help highlight that for the last sixty or more years, African Americans have seen very little changes in home ownership rates, staying right around forty percent, and that we need to finally get the country going in the right direction, and it would take a real substantive, long term increase in order to get to this you know,

clear strong majority of black home ownership level. We think it's necessary to address the racial wealth divide and racial economic and equality and what are the steps that need to be taken in order to meet that goal. You know, I don't think most banks if any banks are going to increase their mortgage landing to African Americans by fifty

next year. But I think what banks can do is recognize that we have to commit ourselves to increasing mortgage lending to African Americans by let's say five percent next year, and then try to do that five percent the year after that, and so we can start getting on the half of substantive change over time. I look not even at so much the whole kind of total numbers, because

I understand the market goes up and down. How many loans are banks doing each year various Right now, we have a higher interest rate, that might be less overall lending, but the percentage of black loans, you know, you can focus on increasing that, whether in a very strong market or a weaker market. And so, you know, I look for that type of a step by step progress. We saw the big lenders make these very big public pledges a few years ago to do exactly what you're talking about.

What did you think when those pledges came out and how is it actually played out among the coalition that you're part of. Well, you know, for years I had been advocating and working with various organizations for finance institutions to recognize the reality of the racial wealth divide. Right, and NCRC has been working for years and many originations

been working for years on increasing minority home ownership. So I was glad to see that financial institutions across the country we're coming forward and say that we are making pledges to address the racial wealth divide, the racial wealth gap. So that is good that they're on that page. They're

recognizing that. I have some concerns that some of these pledges are overly broad, where you could say, you know, we're doing billions of dollars in order to bridge racial wealth divide, but not really clarifying, well, how much of that Let's say it's three billion dollars, how much of that lending were you already doing the previous years, Like

how much of that is new lending additional lending? And also too, to be clear, this is lending, this is an investment in giving of new dollars in right, it's them actually selling their products. Are saying if they did two billion last year, they're gonna do three billion next year. They're saying, well, and we hope to sell an additional billion dollars of products. Oftentimes it gets tied into this

philanthropic giving. So I think it's really it's important we're gonna make progress to be real specific about what is being offered, what is being homist, and what they hope to achieve in the next five to ten years. I mean, that's a really important point you're making, is that you're not asking banks to give, you're asking banks just to

sell their product. Yes, well, I mean I'm also asking banks to give fair Enough, we've been talking about banks, there are also non bank lenders that have started to move in offer loans that banks sometimes won't. How has that worked out? That's a growing important component that non banking companies are a larger and larger segment of those

doing important mortgage lending and other types of lending. And you know, we are having more and more conversations with these other industries about, you know, what is your commitment to ensuring that the mortgage lending space, a small business lending space is something that serves all people, right, It's

not something that we just think banks should do. Earlier in this episode, we heard from a young man named Terrence Jones Jr. In Baltimore whose family lost their home be because his dad had to cut back on work to become his wife's caretaker, and he now lacks the desire to buy a home of his own, fearing that he could lose everything. What do you say to a young man like that who lost faith in the ability to buy a home. I think what I would say

to someone like that. I mean, one is first as important to recognize, you know, the challenge and the trauma of because it's a financial asset, but it's also something very personal, right, and it's something that you really do feel a loss, like if you lose a home and then you're going into rentorships, so you know, I think first important to recognize that loss um but also the economic benefits and even the kind of personal benefits of being able to own a home and be able to

stay and I have to worry about rent changing every year or that they might not continue lease. But you have something that you can stay in and you know, and your kids can come back to. It's still something that probably would be beneficial for you. And trying to figure out what is the best type of a mortgage program, what is the best economic situation you can set yourself up in so that this can be as safe and

secure for you as possible. I don't think in overall the challenges, African Americans don't have a desire for homeownership, you know. I think we see repeatedly that when there are opportunities, the African Americans are quick to jump in to the homeownership market. It's more about creating sustainable mortgage learning programs that can work considering the economic reality of African American Diedrich Cossante Mohammed, thanks for speaking with me

today and I was great talking with you. Thank you. You can see Dietrich Cossante Mohammed's report on Black homeownership at NCRC dot org, and you can read Seawan Dunnan and and choice story about banks and Black homeowners at Bloomberg dot com. Thanks for listening to us here at The Big Take, the daily podcast from Bloomberg and I Heart Radio. For more shows from my Heart Radio, visit the I Heart Radio app, Apple Podcast, or wherever you listen.

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