Posted by: Ray Brescia | November 17, 2015

Banks in Baltimore: Back to Their (Old-Fashioned) Discriminatory Ways

In the early days of the recent financial crisis, the Mayor and City Council of Baltimore sued Wells Fargo bank alleging that the financial institution had engaged in what has come to be known as reverse redlining: lending money to residents of communities of color on unfair terms.  This is to be contrasted with traditional redlining, which came about when the federal government, starting in the 1930s, refused to guarantee mortgages in certain communities, and banks followed that lead and refused to make loans in those communities, primarily communities of color.

Back in 2012, the reverse redlining suit was settled by Wells Fargo.  The lawyers for the Mayor and City Council described the key components of the settlement as follows:

Under its agreement with the City, Wells Fargo will provide $4.5 million in direct down payment assistance to qualifying Baltimore homebuyers. Wells Fargo will provide an additional $3 million for the City to use for priority housing and foreclosure-related initiatives. As part of the agreement, Wells Fargo has also committed to making $425 million in prime mortgage loans in Baltimore over the next five years, $125 million of which will be in low and moderate income neighborhoods.

Today, the National Community Reinvestment Coalition has released a report indicating that banks in Baltimore seem to be returning to their discriminatory ways, but this time, engaging in old-fashioned redlining again: denying credit to borrowers residing in predominantly minority communities within city limits.  Key findings of the report are that:

· There are very different patterns of lending in Baltimore City and the surrounding counties, with disinvestment in most of the city and affluence in the suburbs.

· In Baltimore City, race matters most in mortgage lending. Lending is greater in neighborhoods with larger white than African American populations, and there are tremendous disparities in home lending for African American and white residents.

· In the surrounding suburban counties, economic factors are the most useful in predicting home purchase lending activity.

· It is very difficult for borrowers of any income to be approved for mortgage loans in Baltimore City, where low- to moderate-income (LMI) census tracts are the majority. An LMI applicant is more likely to receive a mortgage loan in wealthier neighborhoods in Baltimore County.

 

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