Racial Bias In Mortgage Loans: Looking For Solutions

Based on state statistics, this much is a given:

In the Seattle metropolitan area, people of color (except for Asians and Pacific islanders) apply for mortgage loans at two-thirds the rate of whites. They're also denied at almost twice the rate of whites.

Why this happens - and, more significantly, what can be done about it - were the topics of a forum last week that brought together lenders, community activists, government experts and others.

Sponsored by the King County Office of Civil Rights and Compliance and the Washington State Human Rights Commission, the meeting was a follow-up to a state report on mortgage-lending discrimination. (That report did not factor Asian or Pacific islander loan rates into its major conclusions because of statistical problems with the data.)

"Discrimination in lending is a very complex problem, and there may be many layers where discrimination is lurking," said Bailey deIongh, enforcement supervisor for the county civil-rights office, in challenging about 100 forum participants to explore the problem.

Among the "whys" given: People of color may not apply for loans because they don't know how, they don't trust financial institutions, they don't think they'll be accepted or they can't find affordable housing.

And for some, the problem may be not speaking English and not having loan literature available in their native language.

As for why they're turned down, among many possible reasons may be their amount of debt or not having enough for a down payment, a lack of traditional financial documentation or the loan policies of specific lenders.

But as Mark Thomson, assistant director of the state Department of Financial Institutions, pointed out, it's difficult to understand the source of the discrimination.

"Is the discrimination in lending," he says, "or is it one step further back with jobs and wages that make it difficult for people of color to earn enough" to get a mortgage.

Among the solutions proposed by those attending the forum:

-- Establishment of clearinghouses in minority communities "where individuals can get financial counseling, education and information on the application process," suggested Edward Giles, president of the Central Area Chamber of Commerce.

-- Employing more people of color in the mortgage business, encourage lenders to be more sensitive and knowledgable about cultural differences and be more flexible in loan-underwriting processes and criteria. That last suggestion is "where the rubber meets the road," stressed real-estate broker Paul Bascomb.

-- Instead of simply denying loans to individuals, lenders should give them "a series of steps that they can follow so that they can come back in six months and get into a house," said Walter Phair, affordable-housing specialist for Washington Mutual Savings Bank.

-- Helping low-income applicants by building affordable housing; develop programs to help with down payments.

Several participants observed that some of these solutions already are at work. But as State Sen. Dwight Pelz, D-Seattle, pointed out, low homeownership among people of color "is clearly a huge social problem, and there's no magic solution. It's an issue that's going to require the dedication of individuals, the community and financial institutions."