By: John Fulmer//June 24, 2010
By: John Fulmer//June 24, 2010//
A report released Wednesday by the Empire Justice Center shows prime mortgage lending decreased between 2006 and 2008, and documents that low-income and minority neighborhoods were hardest hit by the slowdown.
“The River Runs Dry: Decreased Access to Mortgage Credit in Rochester’s Underserved Neighborhoods” compares lending changes in those communities to changes in majority white and middle- and upper-income neighborhoods between 2006, the start of the foreclosure crisis, and 2008, the most recent year for which mortgage lending data is publicly available.
The report also includes lending maps for Rochester and Monroe County.
“The very communities that are suffering the most from the foreclosure crisis — neighborhoods of color and low-income areas — are finding it increasingly hard to access mortgage credit,” Barbara van Kerkhove, the report’s principal author, said in a release. “We are now seeing indications of redlining in these neighborhoods, places where, until recently, there was reverse redlining going on.”
One of the interesting aspects of the new study, van Kerkhove told The Daily Record on Thursday, is that while conventional lending has decreased, FHA loans have seen an upswing, but only for white and upper-income buyers. This is a bit forbidding because lower-income and minority buyers historically have used FHA loans to purchase homes, she said.
“That has been their way of accessing credit,” van Kerkhove said.
Also, van Kerkhove said refinancing is one way to get out of a bad loan, but it’s becoming more difficult for minorities and the less-affluent. To fix the problem, van Kerkhove said she would meet with local bankers and do some more analysis.
“We want to work with banks with innovative lending,” van Kerkhove said, adding that it was simply good business to give affordable loans and refinancing opportunities to the poor and minorities if done correctly. “We don’t want banks to make bad loans.”
Key findings include:
“This research confirms that homeowners in neighborhoods hit hardest by predatory lending and the foreclosure crisis are not getting refinance loans, one of the primary ways to get out of unaffordable loans. And we already know that loan modifications are happening at a snail’s pace,” said Ruhi Maker, a senior attorney at Empire Justice. “This is just another strike against our low-income and minority neighborhoods.”
Key recommendations include:
The center released a report in May that showed the number of low-cost home loans made in the same period dropped significantly, and that minorities were affected most by the decline in lending. The study examined lending practices in seven cities, one of which was Rochester. The data compiled for that report piqued van Kerkhove’s curiosity and she dug deeper into the statistics.
The previous report also found that major banks receiving Troubled Asset Relief Program funds made significantly fewer loans in the neediest neighborhoods. At that time, van Kerkhove said taxpayers were led to believe banks would use TARP funds to invest in minority neighborhoods. That report also showed that prime-refinance lending in the seven cities’ white communities by the nation’s four largest banks — Bank of America, Citibank, JPMorgan Chase and Wells Fargo — was up by 32 percent between 2006 and 2008, but down 33 percent in minority neighborhoods.
The full report can be found at www.empirejustice.org.