SAN DIEGO (KGTV) — A report on lending in San Diego County says financial discrimination on the basis of race is rampant in most San Diego communities.
The report from the NAACP's San Diego Branch says they found lending patterns for home mortgages and small business loans consistent with racial discrimination.
According to the local NAACP, they reviewed publicly available federal loan disclosures released under the Home Mortgage Disclosure Act (HMDA) and Community Reinvestment Act (CRA).
"We have stuff called fair lending and fair housing and all that stuff but is it really fair," said NAACP San Diego Branch Housing Committee chair Mr. Derrick Luckett. "That's the question, and it is not."
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The NAACP says it analyzed HMDA mortgage applications for San Diego County for 2018 and 2019.
According to the report, "We considered applications for single-family homes and first liens, which includes over 174,000 applications that were either approved or rejected (withdrawn or incomplete applications are not considered). In San Diego County, the racial gap in mortgage approval rates appears at statistically significant levels for all race/ethnicity categories compared to Whites, except for Asians who enjoy similar approval rates to whites (Figure 1). Whites enjoy an approval rate of 85%, while Blacks have the lowest approval rates at about 74%."
Those numbers are similar to findings in a regional report that looked at impediments to fair housing choice.
According to the 2020 report, which the City of San Diego took the lead on, throughout San Diego County, white applicants were noticeably overrepresented in the loan applicant pool, while Hispanics were severely underrepresented.
When looking at race by income level, the report stated, "White applicants at all income levels generally had the highest approval rates. Similarly, high approval rates were recorded for Asian applicants, although there was some variation by jurisdiction. Approval rates for Black and Hispanic applicants, however, were well below the approval rates for White and Asian applicants in the same income groups in 2012. These gaps had narrowed somewhat by 2017, but were still present. Specifically, Black applicants consistently had the lowest approval rates compared to other racial/ethnic groups in the same income groups."
The report did note, while the analysis provides an in-depth look at lending patterns, it does not conclusively explain any of the discrepancies. It says, "Aside from income, many other factors can contribute to the availability of financing, including credit history, the availability and amount of a downpayment, and knowledge of the homebuying process. HMDA data does not provide insight into these other factors."
Redlining
According to a city of San Diego report, several intersecting and overlapping factors have impacted patterns of segregation and integration over the course of the city's history.
The report says, "These factors include White flight; housing costs; access to well-paying jobs and economic mobility; racially and economically restrictive covenants within real estate deeds; redlining; discriminatory real estate practices; zoning; freeway construction; ballot initiatives; and public resistance to increased housing and density."
In the 1930s the Home Owners' Loan Corporation (HOLC) was established to buy mortgages at risk of foreclosure and refinance them into new government mortgages.
According to an appendix in the city's report, "The HOLC would not buy and offer mortgages in areas they deemed economically hazardous. To identify these areas, maps were made of major cities with each neighborhood ranked as either ‘A’, ‘B’, ‘C’, or ‘D’. Neighborhoods ranked ‘D’, shown in red on the maps, were ineligible for federal mortgages, an action known as ‘redlining.’ Redlined neighborhoods were often the oldest neighborhoods in the City occupied by lower income residents and people of color. This was true for San Diego as well, where most of the redlined neighborhoods were in the Southeastern and southern areas of the City where high concentrations of African Americans, Asians, and Hispanic residents lived."
The report says in 1934, Congress passed the National Housing Act and established the Federal Housing Administration (FHA) to administer a program that offered federal mortgage insurance for private lenders in an effort to spur private lending.
"The FHA used the same redlining principles to deny mortgage insurance. Soon private banks, lending institutions, and the Veterans Administration (VA) would follow suit. When the FHA expanded into construction loans for homebuilders, discrimination became even more explicit as the FHA prohibited builders from selling homes to African Americans," the report stated.
Working to educate
"I hear the stories of my mom and dad, you know the things they had to go through growing up," said S.A.K.K. Realty Owner Sheri Jones.
As a successful realtor and leader in the community, Jones has heard people's fears. She's now working on education and empowerment.
"Let people know I have a lender or lenders that they can lend to you, and this is how it's going to work," she said. "If you can't be approved, we're going to teach you what you need to do to tweak it, so you need to get approved."
She said there are other changes that can help people be more comfortable with the process.
"There's not a lot of minority realtors in the business and not a lot of minority lenders in the business. I think even on down to home inspector, you know, escrow companies. It just really needs to be diverse because now we have people that look like the buyers, they feel more comfortable buying," Jones said.
Jones also suggested more improvements in down payment programs.
The Fair Housing Act prohibits discrimination based on race or color, religion, sex, familial status, national origin, and disability.
There is a governing body in San Diego County looking for residents.
The San Diego City-County Reinvestment Task Force (RTF) is a public-private body that was created by the City and the County of San Diego to evaluate local bank lending practices and develop strategies for reinvestment in low- and moderate-income communities.
The group monitors the percentage of deposits that major local banks reinvest into the community through small-business loans, affordable housing development, and mortgage loans to residents in low-income neighborhoods.
San Diego City Council member Monica Montgomery Steppe is a co-chair of the board.
In a statement to ABC 10News, she wrote, "My office has been focused on a holistic approach to tackling the disparate impacts that decades of intentional disinvestment has had on our Black residents and under resourced communities," said Councilmember Monica Montgomery Steppe, co-chair of the City-County Reinvestment Taskforce. "We are working to provide housing stability for these residents with a new San Diego Black Homebuyer Program that helps with down payment assistance, and the new Wells Fargo BIPOC Wealth Opportunities Restored through Homeownership (WORTH) initiative. The WORTH initiative supports increasing BIPOC homeownership by creating 5,000 new homeowners in eight markets by 2025, for a total of 40,000 new BIPOC homeowners," added Montgomery Steppe.
