Banks Snub Chicago Aldermen On Equitable Mortgage Lending

Wall Street
American flags hang outside of the New York Stock Exchange in New York on Tuesday, Feb. 16, 2021. Chicago aldermen on Friday blasted the big banks for failing to participate in a hearing on mortgage lending inequality. Frank Franklin II / AP Photo
Wall Street
American flags hang outside of the New York Stock Exchange in New York on Tuesday, Feb. 16, 2021. Chicago aldermen on Friday blasted the big banks for failing to participate in a hearing on mortgage lending inequality. Frank Franklin II / AP Photo

Banks Snub Chicago Aldermen On Equitable Mortgage Lending

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Correction: An earlier version of this story mischaracterized the amount in rent paid by an African-American family that pursued homeownership.

Chicago city council members who wanted to question banks on their weak lending records in Chicago’s Black and Latino neighborhoods were disappointed Friday when banks skipped out on a hearing called by the Housing and Real Estate Committee. At least some aldermen suggested the city might need a “responsible lending ordinance” — or perhaps even its own public bank — to keep financial institutions in line.

Aldermen had invited Chicago’s largest mortgage lenders to attend the hearing, but those who took a pass included Associated Bank, Bank of America, Citibank, Fifth Third Bank, PNC Bank, US Bank, Wells Fargo, Wintrust and JPMorgan Chase. Only Chicago-based Guaranteed Rate agreed to participate, though in the end aldermen did not ask the lender to appear as the sole industry representative.

“[The banks are] fine to come ask for the city’s money,” said Ald. Matt Martin, 47th Ward. “They’re fine coming into communities asking for deposits, but when the time comes to ask any questions about using that money, they’re nowhere to be found.”

Aldermen heard nearly three hours of testimony on the causes, impacts and possible solutions to banks’ dismal lending record in Chicago’s Black and Latino communities.

The hearing was spurred by a 2020 report from WBEZ and City Bureau that showed for every dollar banks lend in Chicago’s white neighborhoods, they invest 13 cents in Latino neighborhoods and just 12 cents in the city’s Black neighborhoods.

The issue of mortgage lending matters for both individuals and communities. Without access to lending, families are locked out of homeownership and the opportunity to build wealth, and communities are deprived of desperately needed investment, stability and growth.

“In the wake of the WBEZ/City Bureau Report we saw lots of announcements of more money for South and West Side communities,” said city housing commissioner Marisa Novara. “And don’t get me wrong, more investment in South and West Side communities is clearly needed. But what’s also clearly needed is the painstaking, non-headline-grabbing, internal bank work of examining how your systems and structures are perpetuating racist outcomes, and then solving for them, repeatedly. That’s what we really want and need to see, and it’s what our city deserves.”

Novara said no one needs to have ill intentions to produce discriminatory outcomes. Historically racist policies from redlining to predatory lending have created a current real estate landscape in which objective decision making based on criteria like credit scores and appraisals will continue to perpetuate inequity, Novara said.

Also participating in the hearing were Illinois Treasurer Michael Frerichs; City Treasurer Melissa Conyears-Ervin, Congressmen Mike Quigley and Jesus “Chuy” Garcia, a member of the House Banking Committee; and nonprofits Neighborhood Housing Services of Chicago and Woodstock Institute.

Would-be African-American homeowner Joe Bozeman also testified.

“We love Chicago and wanted to establish roots here. However, the systems required to buy a home seemed unwilling to invest back,” said Bozeman, an environmental and energy engineer. He and his wife, both PhDs, tried three banks before giving up. One required 20% down on the half-million-dollar home they wanted.

“I don’t know many black and brown families that have $100,000 of disposable income,” Bozeman said. He said he’s paying nearly as much in rent as what his monthly payment would have been if he’d been able to purchase.

City Treasurer Conyears-Ervin also told of difficulty trying to buy a home in Chicago’s West Side North Lawndale neighborhood.

“The problem that I quickly discovered was that banks do not want to lend to someone purchasing in North Lawndale,” Conyears-Ervin said. “Not even to an executive at Allstate, which was me at the time, with a Master’s degree in finance.”

Conyears-Ervin said she could not have qualified for a conventional mortgage if a city program hadn’t been there to help.

Advocates: Systemic racism ‘continues unabated’ in home lending

Home ownership rates in Chicago’s Black and Latino communities have been falling, according to information presented by Anthony Simpkins, president and CEO of Neighborhood Housing Services of Chicago.

Citing research by the DePaul Institute for Housing, Simpkins said not only are banks lending less in Black and Latino neighborhoods, they are also filing more foreclosures.

And he said borrowers of color who are able to get a loan are often charged a higher interest rate; in 2019 he said Woodstock Institute found nearly 35% of African American mortgage borrowers in Chicago paid higher rates, 17% of Latino borrowers.

“This is what’s called ‘risk pricing,’ which is just a modern-day equivalent of redlining,” Simpkins said.

Simpkins said in the absence of lending, “investors are profiting from the opportunity to grab cheap and undervalued homes and turn them into rentals …. Wealth, value and money are flowing out of our neighborhoods and into the pockets of investors — who, by the way, do have access to capital.”

While redlining may be illegal, “the reality is that the same systemic racism outlawed generations ago continues unabated in our financial system today,” Simpkins said.

Banks promise to maintain an “open dialogue”

An industry group, the Illinois Bankers Association, sent a letter to Housing and Real Estate Committee chair Ald. Harry Osterman Friday, saying the financial institutions invited to the hearing “recognize the importance of maintaining an ongoing dialogue on mortgage access concerns throughout Chicago.”

Randy Hultgren, president and CEO of the group, said in talking with member banks invited to participate in the hearing, “it was decided that the best way to present what they’ve been doing is with this letter … of work that a lot of banks are doing, literally billions of dollars that they’re putting into communities that they would absolutely agree have been underserved.”

The letter includes eight pages enumerating commitments individual banks have made to “equity in Chicago,” from JPMorgan Chase’s promise to increase lending to Chicago’s Black and Latino borrowers by $600 million over the next five years to down payment assistance programs and participation in an equity commission organized by the city and state treasurers.

Hultgren said there are lots of parties responsible for unequal lending — from property appraisers to credit reporting agencies to the government.

Alderman repeatedly criticized banks for their absence at the hearing.

They also wrestled with the fact that many banks with dismal lending records in Chicago’s Black or Latino neighborhoods receive outstanding scores on the federal government’s Community Reinvestment Act requirements, which requires that banks lend in communities where they do business.

“How can you be rated so high by the CRA, and yet in real terms be performing so poorly for Black and Brown households?” asked Ald. Daniel Laspata, 1st Ward.

Horacio Mendez, president and CEO of local lending watchdog Woodstock Institute, called that “the $64 million question.”

“It is entirely within the rights of a city like Chicago to be able to say that these federal mandates don’t really seem to be working in Chicago,” Mendez added. The state recently passed a state Community Reinvestment Act; it awaits the governor’s signature.

“We are going to look potentially at a responsible banking ordinance,” Osterman said near the hearing’s close.

Aldermen also brought up the possibility of a public bank owned by the city that could set its own lending standards and priorities. Earlier in the week, aldermen discussed whether banks with racially disparate lending records should be allowed to hold city deposits, as many currently do.

Linda Lutton covers Chicago neighborhoods for WBEZ. Follow her @lindalutton.