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Report: Refinancing more difficult for minorities

Courtesy Empire Justice Center

A report released by the Empire Justice Center last week indicates members of “communities of color” in Rochester and six other cities across the country were denied access to conventional home refinancing far more than members of predominantly white neighborhoods.

The report, titled “Paying More for the American Dream V: The Persistence and Evolution of the Dual Mortgage Market,” compares loan denial rates across neighborhoods in New York City, Los Angeles, Charlotte, Cleveland, Boston, Chicago and Rochester.

In all of the cities examined, lenders denied refinance loan applications at significantly higher rates in predominantly minority neighborhoods than white neighborhoods.

The findings, including data for the years 2008 and 2009 in Rochester, were among the worst of all the cities in the study.  

The results for Rochester indicated:

  • In 2009, loan denial rates in communities of color (80 percent minority-populated neighborhoods) were 58 percent compared to loan denial rates of 16 percent in predominantly white communities.
  • While loan refinancing activity increased by 130 percent in predominantly white communities in 2008 and 2009, it declined by 46 percent in neighborhoods of color.

“The sad part is the communities of color that were hit with predatory lending during the foreclosure crisis after they were hit by an economy in which people lost their jobs now have less access to credit, too,” said Barbara van Kerkhove, an Empire Justice Center policy analyst  and one of the principal contributors to the report.

The contributing agencies plan to draft a letter making their findings known to area lenders and to have discussions with banks and lenders regarding their findings.

“We want them to work with us to figure out ways to address it — through innovative products, working with community organizations to make sure borrowers are credit ready, and working with local government to invest in neighborhoods so property values stabilize,” van Kerkhove explained.

“Refinance loans are critical to stabilizing communities hardest hit by the foreclosure crisis,” said Sarah Ludwig, co-director of the Neighborhood Economic Development Advocacy Project in New York, one of the co-authors of the report.

Among the measures the agencies would like to see enacted to prevent the inequitable lending statistics are:

  • Prioritizing fair lending enforcement;
  • Expansion of the Community Reinvestment Act to promote responsible lending and investment;
  • Improving the Home Disclosure Data Act reporting requirements to bring greater transparency to mortgage lending and foreclosure prevention efforts; and
  • Ensuring access to safe, affordable mortgages when updating federal mortgage programs and implementing regulations under the Dodd-Frank Act.

The report analysis came from federal government 2008 and 2009 Home Disclosure Act Loan Application Register data, the most recent years information was available.

The creation of the federal Consumer Financial Protection Bureau as a result of the Dodd-Frank Act, should make more relevant lending data such as credit scores and loan to value numbers available for analysis in the future.

Van Kerkhove said criticism that the Community Reinvestment Act caused irresponsible lending by banks is misplaced and the study found “banks that didn’t have Consumer Reinvestment Obligations were doing more high-cost lending than banks that did.”

The report called for state attorneys general to undertake stronger enforcement measures and require lenders to offer more affordable loan modifications and for more transparency with regard to attorney general and Department of Justice investigations. Van Kerkhove and her colleagues fear the new Consumer Financial Protection Bureau’s powers could be weakened by proposed legislation before it even starts in July.  

The collaborative report is the fifth in an annual series examining systemic inequalities in the housing finance system and its impact on lower income neighborhoods and communities of color.

The entire report is available on the Empire Justice Center website at