In the midst of the biggest home-buying boom in Maryland history, African-American mortgage applicants in Baltimore were nearly 3 1/2 times more likely than their white counterparts to be rejected for a loan, and a new study suggests the gap between minority and white approval rates is increasing nationwide.
In a report based on 2002 federal mortgage data, the Chicago-based Association of Community Organizations for Reform Now said the rate of rejection among black applicants in the Baltimore region climbed 6 percent from 2001, making it the 9th highest among 115 regions in the study. Latinos were 2.4 times more likely than whites to be rejected, a decrease of about 3 percent from 2001.
The report's figures from last year show that 6.09% of applications for conventional home loans submitted by whites in the Baltimore region were denied, while 21.05% of applications for such loans from blacks were denied.
Nationally, black homebuyers were 2.4 times more likely to be denied a conventional loan than were white borrowers, and Latino borrowers were 1.6 times as likely to be rejected. Both were slightly higher than in 2001.
"We all know discrimination is wrong; it's just a matter of how to address it," said Mitchell Klein, an ACORN organizer in Baltimore.
The disparity cut across income groups. Upper-income blacks in the Baltimore region - which included the city and Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne's counties - were denied more than three times as often as upper-income whites and nearly twice as often as moderate-income whites, the community group said.
Baltimore lenders and housing officials dispute that discrimination is at play, saying that banks have launched numerous programs aimed at helping minority borrowers win approval. Oftentimes, they say, minorities are rejected because of poor credit or because they haven't educated themselves ahead of time about the credit and income requirements involved in getting a loan.
"We are not underwriting any sector of the market in a harsher light than any other sector and, if anything, we are trying to establish credit policies that are more lenient to help ... the minority sector and the low- to moderate-income sector," said Robert Kaestner, a Bank of America vice president and spokesman for the Maryland Mortgage Bankers Association.
Bank of America has worked with ACORN to develop a program for low- and moderate-income borrowers that comes with more flexible credit and debt standards, as well as a favorable interest rate.
"That sector of the market is the largest growth sector of the market that we see over the next five years," Kaestner said. "So if you want to increase market share ... there is a huge untapped market."
M&T Bank Corp. launched a similar program after ACORN officials approached the bank during its merger with Baltimore-based Allfirst Financial Inc., which was completed in April.
"A lot of these are people whose families have no history of home ownership," said Joanne Schwartz, M&T's community reinvestment officer. " ... We're pretty happy with the way things are going."
But many minorities are unaware of such programs, real estate brokers said. And too often, those applicants find they don't get the help they need.
"If a black person has a credit problem, most often it [the application] is just flatly rejected," said Michael Cassell, a Maryland real estate broker and appraiser. "But if a white person has a credit problem, the mortgage officer will guide them through the problem and help them solve it."
Cassell, who also is chairman of the Maryland Real Estate Commission, said many lenders simply don't put forth the same effort with minority applicants.
The result is that many minorities resort to predatory lenders, who charge higher interest rates and fees, or government-backed loan programs, which also cost more than conventional mortgages, said Klein, the ACORN organizer. More than half the loans made to African-Americans in Baltimore were backed by the government, the ACORN study said.
To avoid those alternatives, minorities must walk into a lender's office prepared, said Shanelle Shakoor, housing director for the Baltimore Urban League. Shakoor agrees with mortgage industry officials who say educating minorities about home buying is the key to erasing the disparity in loan approvals. The Urban League and several other community groups in disadvantaged neighborhoods offer seminars on the subject.
"They'll find out about the mortgage product that best suits their needs so they don't try to apply for a mortgage that they don't qualify for and end up getting rejected," she said.
Minority borrowers who have sought counseling are much more likely to win approval, she said.
"The tendency is to conclude that mortgage companies are prejudiced ... and I think that's a simplistic conclusion and may not look at this problem in detail," said Ralph Dawson, president-elect of the Maryland Association of Mortgage Brokers.
Dawson, who is black, said community groups and the industry need to focus efforts on preparing applicants before they sign a contract to purchase a home.