Mar 15
2024
Solutions to Buffalo’s lagging mortgage lending to Black residents
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Second in a series on the impact of lending practices on homeownership by Black residents in Erie and Niagara counties. The first story is here.
Analysts and community leaders suggest a series of banking reforms aimed at increasing Black homeownership in Erie and Niagara counties.
Ideas include expanding outreach efforts to underserved communities and retooling mortgage lending options by lowering interest rates for low-to-moderate income buyers and considering rent and bill payment history in lieu of credit history.
“Potentially having those rates lowered and providing more ability for families that may not have higher income streams to have some subsidies rolled in … I think will really go a long way,” said Paul Perez, vice-president of the Erie-Niagara Board of Realtist, a local branch of the National Association of Real Estate Brokers.
Paul Perez, vice-president of the Erie-Niagara Board of Realtist. Photo by Garrett Looker.
Some advocates are also calling for increased government involvement, while others mention the need to change attitudes about homeownership among Black renters and to address issues related to lower incomes. Because a higher denial rate for Black applicants often correlates with lower incomes, lower credit scores and more debt, the mortgage lending process remains unfavorable for these individuals, according to Jacob Channel, senior analyst at LendingTree, an online-lending marketplace based in North Carolina. A concerted effort needs to be made across industries to challenge practices within financial institutions that may be unintentionally discriminatory, he said.
“We’ll not only have to look at getting rid of things like unconscious bias in the loan approval process, we’ll also have to look at the frankly challenging things like boosting incomes for Black workers, or giving Black borrowers access to other types of credit so that they can strengthen their credit scores before they apply for a mortgage,” Channel said.
Investigative Post analyzed the most recent federal Home Mortgage Disclosure Act data from 2018 through 2022 for Erie and Niagara counties, as well as 2021 and 2022 data for the top 50 metro areas in the United States.
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The analysis found Black applicants are twice as likely to be denied a home mortgage as the overall population in Erie and Niagara counties.
Results confirm similar studies done by LendingTree, the New York State Attorney General, the state Division of Financial Services and the Center for Investigative Reporting.
Income disparities are partly to blame for low homeownership among Black households in the region, mortgage analysts and community leaders say. But other factors – including remnants of historic redlining – also play a role, they say.
In discussing ways to address issues raised by the Investigative Post analysis, much of the focus by analysts and community leaders is on banking.
“I would really like to see those community relations folks [from banks] out in the community more and talking to organizations, talking to businesses, talking to customers and even talking to the city about opportunities,” said Rasheed Wyatt, a former banker who is now University of District Common Council member.
Rasheed Wyatt, University of District Common Council member. Photo by Garrett Looker.
Financial institutions should educate underserved communities on ways to increase their loan approval odds and paths to homeownership beyond traditional mortgages, he said.
Section 8 vouchers, for example, can be used to buy a house, yet many prospective homeowners likely don’t know that, Wyatt added.
“These banks could be assisting them and giving them that information,” he said.
Banks deny redlining or any type of discrimination in lending decisions, which they say are based on financial considerations.
Some banks with the strongest records of approving loans to Black applicants in the Erie Niagara region have instituted programs in recent years resulting in more Black applicants getting mortgages. Bank of America as well as Evans, Five Star and M&T banks all offer mortgage programs tailored to the needs of underserved communities, and some banks have a hand in funding local housing development projects, as well.
But the solutions don’t fall only on banks, the community leaders said.
“Banks need to be held accountable, and can and should do better,” said Kathryn Franco, former president of the Buffalo Niagara Community Reinvestment Coalition. “We also need our elected officials to do better to be proactive and to really be thinking about policies on how to protect us as consumers within this system.”
Kathryn Franco, former president of the Buffalo Niagara Community Reinvestment Coalition. Photo by Garrett Looker.
Further government monitoring to ensure fairness in banking was also suggested, as was expanding some existing banking regulations – including the Community Reinvestment Act – to non-bank lenders. Enacted in 1977, the act was established to prevent redlining and encourage banks to service low- and moderate-income areas.
Other suggestions include more government collaboration with banks, government-sponsored housing subsidies for low-to-moderate income buyers, and a government-run bank.
“I do think there could be better collaboration between government and banks,” Wyatt said.
Educating prospective home buyers is the responsibility of the real estate industry, not the financial industry, said Drew Scott, president of the Erie-Niagara Board of Realtist. He said spreading knowledge was the primary focus of his group.
“We just need them to do their part the right way and their part is to lend, and lend fairly,” Scott said of the financial industry. “If they had always done that, we wouldn’t be sitting here having this conversation.”
Community leaders also spoke of a need to raise Black incomes and educate the community on the value of homeownership.
That less than 10 percent of mortgage applications come from Black residents speaks to a rental culture fueled by a lack of generational wealth, as well as a lack of knowledge, analysts suggest.
Some community leaders say that many in the Black community, especially in places like Buffalo, don’t view homeownership as an option due to poor rates of intergenerational homeownership. Wyatt said he’s observed within his own district, for example, how public housing designed to be temporary has housed generations of families in the Black community.
“I’ve got the Kenfield-Langfield community, and those developments were created not as something long term, they were supposed to be short term,” he said. “Now they’re long term.”
As a result of the rental culture, generational wealth opportunities aren’t being created, said Perez, of the Erie-Niagara Board of Realtist.
“You can see even within just the homeownership rate, [white] families are going to tend to have higher values and assets,” he said.
“Those families are going to, when they pass, have the ability to pass on generational wealth, whereas the Black and the Latino families, their likelihood of passing on generational wealth is going to be slim to none,” he said.
Beyond that, Perez along with several local Realtors pointed out that there are no Black real estate appraisers in the Buffalo area. Perez said he’s observed instances of appraisal discrimination – where an individual’s home is undervalued typically due to their race.
The Federal Financial Institutions Examination Council released a report in February linking appraisal discrimination with harmful lending practices to underrepresented communities.
“Examples of such harm are consumers being denied access to credit, for which they may be otherwise qualified, offered credit at less favorable terms, or steered to a narrower class of loan products,” the Council’s statement said.
