KeyBank approving more mortgages for Black borrowers

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After years of criticism over its lending record to Black homebuyers, KeyBank is reporting a sharp increase in the number of mortgages granted to African-American applicants in the Erie-Niagara region.

The latest data obtained through the federal Home Mortgage Disclosure Act shows that in 2023 KeyBank made 48 loans in the two counties, compared to 12 the year before.

“All the progress that we have made over time is the result of just being able to listen to the community,” said Chiwuike Owunwanne, KeyBank’s Buffalo corporate responsibility office .

Mortgage originations for Black borrowers by all lenders in Erie and Niagara counties inched up last year, although African-American applicants were still rejected at more than twice the rate of whites. 

At KeyBank, 10.4 percent of home mortgages issued in 2023 went to Black borrowers. That compares to an average 2.9 percent the five previous years.

For all lenders, the rate was 6.8 percent in 2023 compared to 5.7 percent in 2022, the federal data shows.

But half of the 20 biggest mortgage lenders in the region issued fewer than 6.8 percent of mortgages to Black borrowers last year, the data shows.

What’s more, that average remains significantly below the 13 percent the Black population represents in the Erie and Niagara region, according to Census data.

These findings follow a two-part report Investigative Post published in March that looked at bank lending in the Erie-Niagara region from 2018-2022. That analysis found KeyBank had one of the worst records of lending to Black homebuyers among large banks, despite being the region’s second-largest lender. At the time, KeyBank said its loan activity to Black homebuyers increased in 2023, but that full documentation was not yet available.

KeyBanks credits new programs

KeyBank representatives attribute the rise in mortgages to black borrowers to several programs designed to meet people where they are in terms of credit score and income.

The bank’s Key Community Mortgage, for example, offers loans based on income and geographic location to target underserved communities. The mortgages, for example, reduce or eliminate some fees, such as not requiring loan insurance typically charged to applicants with lower credit scores.

“When banks design programs that can take into consideration obviously working with your credit, but also taking into consideration being very flexible when it comes to funds to close, then you really have a winning formula,” said Saleem Shabazz, KeyBank Buffalo community development loan officer. 

KeyBank’s Owunwanne also cited the bank’s partnership with Operation HOPE, a national non-profit organization that focuses on bringing homebuyer education to underserved communities.

The partnership led to a series of educational seminars across Buffalo’s East Side and introduced a program that raised the credit scores of 64 percent of participants by an average of 32 points, she said.

With the outreach, KeyBank last year received mortgage applications from 83 Black applicants compared to 23 in 2022.

The 48 loans issued in 2023 compare with a total of 47  in years 2020, 2021 and 2022 combined, according to the federal bank data. 

State and national data also show that KeyBank has diversified its lending beyond the Erie-Niagara area.

In New York State, both the number of mortgage loan applications and originations for Black borrowers nearly doubled in 2023 from the prior year. Similar results were found nationally.

KeyBank has also reinstated its community benefits agreement with the National Community Reinvestment Coalition, a Washington, D.C., based advocacy group  that in recent years had accused the bank of race-based discrimination in mortgage lending.

The community coalition initially partnered with KeyBank in 2016 on a $16.5 billion community benefits agreement with an emphasis on expanding resources to underserved communities. But the relationship soured.

In 2022 , the coalition cut ties with KeyBank, and accused it of discriminatory lending in a report claiming the bank had been “effectively walling out Black neighborhoods in several cities,” including Buffalo. KeyBank denied the charges.

In April of 2024, the coalition and KeyBank announced they would resume their relationship.

“We're not always going to get everything right, and that's the reason why we do have organizations like NCRC to just say, hey, this is what we're thinking, this is what we're seeing, and you can definitely make some improvements,” Owunwanne said.

Some lenders stagnate

Some lenders with poor records from 2018 to 2022 reported little to no improvement last year.

Citizens Bank, for example, had 12 mortgage applications from Black homebuyers in 2023. Four of those applicants received home loans. That represents 2.8 percent of home mortgages the bank issued last year.  In 2022, 3.5 percent of Citizen’s home mortgages went to Black borrowers, according to the federal housing data.

The bank also had the highest rejection rate for black applicants among the major banks, with half of the 12 loan applications being turned down. The average Black rejection rate in the Erie Niagara region last year was 17 percent compared with 7 percent for whites. 

Citizens Bank did not respond to Investigative Post’s request for comment.

Among non-banks, Hunt Mortgage also continued to struggle. Data shows Hunt originated 566 home mortgages last year – the fourth highest number among the region’s 20 top lenders. Twenty-three of those loans went to Black applicants. That’s 4.1 percent of home loans Hunt issued, which tracks with Hunt’s record of barely surpassing the 4 percent threshold within the prior three years, as Investigative Post reported in March.

“We've been doing a lot of various things over the last couple of years, to try to improve those numbers and to be a good partner to the community,” said Hunt Mortgage President Karen Fuhrey.

Hunt Mortgage is governed by different laws than banks, and doesn’t have the flexibility banks do to offer programs such as a state-run, first-time homeowner initiative, she said. In addition, Buffalo’s current housing market is challenging, she said.

“Unfortunately, right now, we're dealing with quite an affordability issue. Obviously, there's limited inventory on the market so if home prices have severely increased, you've got interest rates that are increasing,” Fuhrey said.

I'Jaz Ja'ciel