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(Illustration by Maximilian Franz / The Daily Record)

Report: Race most significant in Baltimore’s lending disparities

A recent report by a Washington, D.C., advocacy group has confirmed what many organizations that work with low-income families in the city say they’ve already suspected: getting a mortgage in Baltimore isn’t necessarily about one’s credit score, it’s about race.

“This report confirms something we have seen but not documented,” said Marceline White, executive director of the Maryland Consumer Rights Coalition, a statewide research advocacy and policy organization that promotes consumer rights and focuses on financial issues.

Earlier this week, the National Community Reinvestment Coalition released a 33-page report that looked at disparities in home lending based on race in Baltimore.

“In Baltimore City, race matters most in mortgage lending. Consistently across models, the most statistically significant factor in predicting mortgage lending is race. Mortgage lending is greater in neighborhoods with larger white than African-American populations,” the report said.

In 2013 white borrowers in Baltimore received 210 percent of the lending for their population size compared to just 37 percent for African-Americans, even though African-Americans are the majority population in the city, according to the report.

“There’s been other research that shows that this kind of discriminatory lending has taken place regardless of credit score,” said White, adding that organizations that lend to low-income and working families have not had mortgages go bad.

“We know that there are families who can repay mortgages,” she said, “a lot of people are being left behind.”

The Baltimore CASH Campaign, which teaches financial literacy for low-income families, thinks the solution to this disparity will have to come from a combination of people in underserved communities and from lenders.

“(Certainly) the data that this report provides needs to be discussed more broadly, and people from these underserved communities need to be a driver of the solution.  Lenders need to be held accountable, as do local officials who purport to want a better Baltimore,” said Sara Johnson, director of the Baltimore CASH Campaign.

The banking community has disputed the report’s findings, citing difficulties in gathering financial data to do this type of analysis.

“Quite frankly, I’m taken aback by this report,” Maryland Banker’s Association President Kathleen Murphy told The Baltimore Sun. “What I see are community leaders and banks working together. We don’t condone discrimination in lending in any form. The picture of the banking industry in this report is completely contrary to what I see.”

The Maryland Department of Housing and Community Development was not able to comment on the report’s findings.

Johnson said she has seen the same racial disparity in tax preparation services, where families can be charged hundreds of dollars for basic services, taking away the advantages of certain tax credit programs such as the Earned Income Tax Credit.

Johnson said the issue needs to be addressed in the upcoming mayoral election. She sees it as a problem that has to be solved for the city to have a stronger local economy, reduce crime and improve schools.

The Community Reinvestment Act, a federal law that requires depository institutions to meet the credit needs of the communities they serve, is designed to help low-income families. But advocacy groups say more incentives for lenders may be needed to spur greater lending in minority communities.

“It’s something the Legislature may want to look at this more and look at the patterns,” said Johnson, adding that lawmakers should do so by “looking at the tools we already have to help find ways to create incentives for banks to loan in a more favorable way.”