Illinois Lawmakers Hear Ideas To End Racial Disparities in Mortgage Lending

Loan Application
The Illinois Legislative Black Caucus held a subject matter hearing Thursday to gather ideas from lenders and housing advocates about ways to address deep racial disparities in mortgage lending. William_Potter / Getty Images
Loan Application
The Illinois Legislative Black Caucus held a subject matter hearing Thursday to gather ideas from lenders and housing advocates about ways to address deep racial disparities in mortgage lending. William_Potter / Getty Images

Illinois Lawmakers Hear Ideas To End Racial Disparities in Mortgage Lending

Illinois lawmakers heard hours of testimony from nonprofit, housing and banking officials Thursday on how to undo racial disparities in mortgage lending.

The hearing was convened by the Illinois Legislative Black Caucus and was precipitated by reporting from WBEZ and City Bureau that revealed wide racial disparities in mortgage lending between Chicago’s white communities and the city’s Black and Latino neighborhoods.

WBEZ found that for every dollar lenders gave for home purchases in Chicago’s white neighborhoods, they invested just 13 cents in Latino neighborhoods and 12 cents in the city’s Black neighborhoods. The disparities were even wider among some of the city’s top lenders, the investigation found.

State Sen. Jacqueline Collins, who represents parts of the city’s South Side and the south suburbs, said the hearing was meant to lay the groundwork for future legislation or policy changes to address disparities.

Collins, who chairs the state Senate’s Financial Institutions Committee, said lawmakers want to explore ways the state can encourage equitable and fair lending practices that bring capital investments to Black and Latino neighborhoods.

“We want to see a lending market where race is not the largest predictor of approval for a home loan,” Collins said.

“We ultimately want to see an end of the cycle of disinvestment, which is at the very root of generational poverty here in Chicago, and throughout the state,” she added. “Answers to how we achieve this are ultimately going to need to come from banking institutions themselves … as well as mortgage lenders out there.”

Collins said she invited some 10 lenders to testify at the virtual hearing, but only a representative from JPMorgan Chase obliged.

Cerita Battles, Chase’s head of affordable lending, said her bank had been analyzing lending outcomes in Chicago even before reporting from WBEZ and City Bureau showed that Chase had the widest racial disparities in lending of any major lender in Chicago from 2012 to 2018.

Battles said that internal examination propelled the bank to step up lending, and she says newly released government data shows Chase is now the top lender — both in number of loans and in dollars lent — in Black communities in the metro Chicago area.

She noted that in the years WBEZ examined, 52% of home purchases in Black communities did not involve financing of any kind. And of the home purchases that did involve mortgages, Battles said one-third were FHA loans. Chase and other banks have moved away from FHA lending in recent years, after being hit with fines and sparring with the federal government over regulation.

Last week, Chase announced it would direct an additional $600 million in mortgage lending to Black and Latino families in Chicago over the next five years to make up for a lack of lending in those communities. The promise is part of a $30 billion commitment by the company to address the country’s racial wealth gap.

Bank of America, Wells Fargo, Fifth Third Bank, U.S. Bank and Citi sent written testimonies in which they touted their companies’ commitments to social and economic equity and highlighted efforts such as down-payment assistance programs or community revitalization projects.

A representative from the Illinois Bankers Association testified on their behalf, highlighting the billions of dollars those companies have spent in recent years for social justice initiatives, career-building opportunities, in-house diversity and inclusion efforts, and programs to assist the underbanked.

“We’re exceptionally proud of our members’ long-standing and recently bolstered commitments to economic equity. But we acknowledge that more work needs to be done,” said Ben Jackson, a vice president with the Illinois Bankers Association. “Disparities in mortgage access are a persistent problem. These disparities create a barrier to financial security and wealth building for communities of color, particularly for Black Illinoisans.”

He said national data suggested there had been marginal improvements last year in lending to black and Latino home buyers.

Lawmakers grilled the bank representatives on how they can ensure banks will lend equitably.

“Considering the history — from redlining to shady mortgages and the Great Recession to these loan disparities — how are we to trust our financial institutions?” asked state Sen. Robert Peters.

Jackson said the recent commitments of lenders should inspire greater trust. He said he sees agreement between activists and the banking industry on strategies that could improve mortgage lending to Black and Latino communities, including adopting alternatives to credit scores, increasing down payment assistance for home buyers — both from the public sector and private banks — and reforms around valuing property.

Nonprofits and community activists shared a host of ideas for the state and lenders to pursue.

They called on the banks to provide matching savings programs, a major increase in down-payment assistance, an expansion of community credit unions and more diversity in underwriting — so those making decisions about loans come from the communities they’re serving.

The activists asked state officials to enact a state-level effort — something more strict that the federal Community Reinvestment Act — requiring banks to lend in underserved communities, and for overhauling the current “racist” appraisal system that values homes in Black areas at a fraction of what those homes would be worth if they were in white neighborhoods.

Asiaha Butler, president of the Resident Association of Greater Englewood, suggested a new Homestead Act for African Americans to purchase property in Black communities.

“It’s going to have to be something very radical. It’s going to have to be something very innovative,” said Butler, who added that her community is still struggling with population loss, foreclosures and bank-owned abandoned buildings.

Sheila Sutton, a housing policy organizer with Housing Action Illinois, one of the groups asked to testify, said she appreciated the banks’ commitments around down-payment assistance and increased lending. “But these responses do not fix the systemic racism in our lending and homeownership landscape, which have deeply harmed Black and brown communities, and their ability to build wealth and share in the American dream,” said Sutton.

She said her organization wants to see state regulation and laws that “reflect and deepen” federal requirements that banks lend in all communities.

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