Major Banks Lag in Minority Home Loans

Despite continuing efforts to help minority families buy homes, California’s largest banks still lag in conventional home-mortgage lending to African Americans at all income levels, according to a report to be released today by the San Francisco-based Greenlining Institute.

The state’s nine largest lending institutions in 1999 made only 59 conventional home loans in South-Central Los Angeles to African Americans earning less than $41,000 a year, according to the report. Statewide, only 2.6% of those banks’ conventional loans went to inner-city blacks.

In contrast, the five branches of Broadway Federal Bank in Los Angeles, which serves primarily minority customers, made 31 such loans, 14 to low-income borrowers.

The report, based on Federal Reserve data, reveals a sharp difference in the number of home loans made to African Americans as compared to whites. Statewide, the number of home loans to whites jumped 78% from 1995 to 1999, while loans to African Americans grew by 51% over the same period.

While the report commended major banks for their zero-down-payment and other programs aimed at helping minorities buy homes, some members of the institute--a coalition of churches and advocates for inner-city economic development and homeownership--said those efforts are not enough to get low-income families into their own homes.

“The banks are helping, but they’re not the only problem,” said Robert Gnaizda, general counsel for the Greenlining Institute. “We still have to deal with local no-growth policies and other issues that prevent low-income housing from being built.”

As the cost of housing rises, as it has steadily since the mid-1990s, African Americans and Latinos are the first to be excluded from home ownership, Gnaizda said. That’s because statistics show their incomes do not rise as rapidly as whites’.

In some areas, such as Silicon Valley and Orange County, home prices are often at least 10 times the median income of African Americans, making difficulty in attaining home ownership more a product of high costs than of discrimination, the institute said.

Only 73 African Americans earning less than $56,000 in 1999 received conventional home loans in Orange County, Southern California’s most expensive housing market, according to the institute. The median price, the point at which half the homes sold for more and half for less, hit $281,000 in the county in November.

Overall, only 358 conventional mortgages--0.7% of all home loans in Orange County--were made to African Americans. The institute noted that African Americans make up only about 2% of the county’s population.

Bank officials agree that a lending gap exists between African Americans and whites, but they echo the sentiment that even the best programs cannot address the region’s pressing affordability problem.

“Even if you get into home ownership with 3% or zero down, the median home prices are so high that low-income people still can’t qualify,” said Andre Brooks, a vice president at Wells Fargo Home Mortgage. “There’s a substantial shortfall of housing for everyone in the state.

Further aggravating the problem is a persistent belief among low-income blacks that large banks do not want their business, said Barbara King of the Assn. of Community Organizations for Reform Now.

“Big banks don’t target the black community,” she said. “The whole credit-review process doesn’t encourage them to come back.”

The Greenlining Institute report covered lending activity by the major banks in South-Central Los Angeles and across the state during 1999.

Banks included in the study were Sanwa Bank, Union Bank, Wells Fargo Bank, World Savings, Citibank, Chase, Washington Mutual, CalFed and Bank of America.

As it did in 1998, Bank of America led the major banks in loans to lower-income African Americans with 17 in 1999, compared with just three for Wells Fargo. Sanwa Bank made no such loans in either year.

For all home loans to African Americans, regardless of income, Washington Mutual led with 257 loans. Bank of America had 214 loans in that category.