Solano Real Estate Scene: Modern day redlining
The Vacaville Reporter published an article Feb. 16, written by Janie Har of The Associated Press, on page one of the business section titled “California Latinos make up small fraction of mortgage market.”
In this story, she quotes from a study done by Reveal, The Center for Investigative Reporting on conventional loan applications in California. She states that nearly half the population of the Los Angeles area is Latino and only 18 percent of the conventional loan applications are from Hispanic applicants and even in the more affordable Fresno market, which is also 50 percent Latino, only 25 percent of the loan apps are Latino homebuyers.
The study did not include data on FHA or VA loan applications, but the story insinuated that mortgage lenders steered Latino and African-American borrowers toward FHA over conventional loans because FHA is easier to obtain even though they claim FHA is more costly.
The article also claims that in the Vallejo-Fairfield area of the San Francisco Bay Area, where residents have flocked in recent years in search of cheaper homes, African-Americans were 2.6 times more likely than whites to be denied and calls this evidence of “modern day redlining.” The study also claims similar numbers in the rural Northern California communities of Salinas and Chico, where the article states Latinos are 1.7 and 2.5 times as likely than whites to be declined.
It has taken me more than a month to write this column because of the subject matter being so sensitive and because of my love and respect for my community and my Solano County real estate market.
It was 50 years ago that the federal Fair Housing Act banned racial discrimination in lending. I was offended by the article because I felt like me and my loan officer team and other local lenders and credit unions were being falsely accused of racist discrimination.
I have no doubt that there are people in the lending business that are racist and I have clearly seen predatory behavior from individual loan officers as well as huge Wall Street companies in Solano County over the years, but to say that “modern day redlining” is going on here, locally, today by local lenders is just not true.
Yes, it is harder to qualify for a conventional loan than a VA or FHA loan because debt ratio, credit rating, down payment and cash reserve requirements, along with the automated underwriting systems (artificial intelligence) are programmed to be more flexible, forgiving and inclusive on government-backed loans.
The last thing our industry should do is repeat our mistakes from the past.
From 2004 to 2007 thousands of African-American, Hispanic, Asian and Caucasian borrowers bought houses in Solano County they could not afford at artificially inflated prices that caused our beloved market to become one of the top 10 counties in the country for foreclosures. We had more foreclosures and home losses from 2008 to 2013 than the previous 50 years combined.
Solano County is a target for predators selling financial products because we are a blue-collar, middle-class population of correctional officers, active duty and retired military, refinery workers and retail workers along with warehouse and manufacturing workers. Most of our population, including me has no more than a high school education, making us vulnerable to making financial mistakes or following in our parents’ footsteps and living paycheck to paycheck. Sixty-two percent of the nation’s population has less than $1,000 in the bank and 52 percent of the folks over 55 have no retirement other than social security.
Local mortgage lenders and Solano County as a whole need a strong middle class and African-American and Latino families are vital to our success. There is only one way to improve the denial rates for African-Americans and Latino folks and that is to financially educate our community like my company is trying to do along with many local lenders and credit unions.
The rich are getting richer and the poor are getting poorer and one reason for this is financial intelligence and education levels. Start early with your kids in high school because time can be your friend or your enemy. This country will not survive as a democracy if 90 percent of the wealth (money and equity) is owned by 10 percent of the population.