"It was a traumatic experience," Gardner said of the mortgage application process, during which her loan terms suddenly worsened. "I felt like I was the only one going through it." But after talking to family and friends, Gardner realized she was not alone.
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Black residents of the Philadelphia area are less likely to get approved for a mortgage than white residents, according to a 6abc data analysis of every 2018 and 2019 mortgage application, which are reported to the federal government under the Home Mortgage Disclosure Act (HMDA).
In the Philadelphia-Camden-Wilmington metro area, white applicants' loans are approved at higher rates than Black applicants' at almost every income level and every loan amount range, the 6abc analysis found. The only exception to this trend: applicants with incomes and loans that are both under $50,000.
Black mortgage applicants are "scrutinized heavily" and are often rejected for "minor discrepancies," said Christopher Sample, President of the Philadelphia Metropolitan Board of Realtist. "This is what stops a lot of African Americans from going through that process, the fact that they could be denied," he added.
Gardner said she prayed about her loan process, because it was the only obstacle to helping her family.
In 2019, Gardner connected with a realtor and began to look for properties in all the Philadelphia areas where she'd previously lived. She originally wanted to rent out homes, but when the coronavirus pandemic hit and her uncle lost his job, Gardner came up with a new plan: She'd buy her uncle's house - where she had spent seven years of her childhood - and fix it up so she could live there with her uncle and her mother, whose living situation "wasn't the safest," Gardner said. In January, she put in a conventional loan application to buy the Carroll Park home.
At first, the loan process seemed to be going smoothly. But when the lender discovered that the house belonged to Gardner's uncle, they told her they were concerned she might be purchasing the home to rent out, rather than to occupy herself.
"I was just like, 'I'm purchasing this home for my family, so that we can live here, so I can help take care of them,'" Gardner said. "For some reason, they didn't believe me! It was actually quite traumatizing."
Then the lender suddenly changed the terms of Gardner's loan. Instead of a $10,000 down payment, they now wanted her to put down $20,000.
"I'm like, 'Where do you think I'm gonna get $10,000 from?'" Gardner said.
Gardner and her realtor each wrote letters to the lender, protesting the change. Then, in March, the lender changed the interest rate on the loan and charged Gardner even more money to keep her original interest rate.
"I feel like it was an abuse of power," Gardner said.
Finally, after a month and a half delay, Gardner closed on the home. But her mother never got to live there with her: While Gardner was fighting to get an affordable mortgage and renovate the house, her mother passed away alone in her home.
"The first word that comes to mind is 'tragic,'" Gardner said.
Disparities in home loans persist nationwide
Gardner's difficulty getting a mortgage is all too common among Black Philadelphians. Across the Philadelphia-Camden-Wilmington metro area, white applicants are about 8 percent more likely to get their home loans approved than Black applicants, according to the 6abc data analysis. There are even wider gaps in two thirds of the 100 largest U.S. metros, the analysis found.
Honolulu, Colorado Springs and Salt Lake City top the list of the most equitable metros, with Black applicants just about as likely as white applicants to get their loans approved. McAllen, San Jose and Charleston are the least equitable, with white applicants over 30 percent more likely than Black applicants to get their loans approved.
The gap between white and Asian applicants' loan approval rates is about the same as that between white and Black applicants' rates in the Philadelphia area, but this disparity is worse compared to other major U.S. cities: It's larger than the gaps in about three quarters of the top 100 metros. However, these disparities are only substantial among middle- to high-income applicants in the Philadelphia area.
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Experts say these gaps stem from decades of discriminatory practices like redlining, a system by which banks denied loans to people of color living in majority-Black and immigrant neighborhoods.
"There's often conversations about 'well, you know, when redlining used to occur, and when exclusionary zoning used to occur.' And the reality is, we're still experiencing a lot of those things," said Anne Fadullon, Director of Philadelphia's Department of Planning and Development. "We still have private entities that are doing things that have bias built in, and so sometimes it's difficult for government to step in to force private entities to do something different."
Still, Fadullon said her department is "trying to think creatively" about current trends in the housing market and potential solutions to mortgage lending inequities.
Lenders also face challenges in closing these gaps: Federal regulations require banks to consider an individual's ability to repay a loan when reviewing an application. According to the Pennsylvania Association of Bankers (PA Bankers), banks in the Philadelphia area must meet rigorous rules in determining whether an applicant qualifies for a loan.
"Many of these rules were put in place after the financial crisis to protect consumers, and failure to comply can result in significant penalties for a bank," PA Bankers wrote in a statement. The Association added that the HMDA data analyzed by 6abc can only show that mortgage lending disparities exist, and not why they exist.
The Federal National Mortgage Association recently made a major change that could help more people - particularly people of color, who are more likely to be renters - qualify for mortgages. As of September 18, lenders can now consider a positive history of rent payments, which are not factored into credit scores, in assessing eligibility.
Still, local fair housing advocates have noted instances of covert lending discrimination that take place even before a loan application is submitted and reviewed.
"It can take a variety of forms," said Rachel Wentworth, Executive Director of the Hosing Equality Center of Pennsylvania. "Whether that be product steering, where a consumer is steered to a particular type of loan that may be inferior to the loan that they qualify for, or whether it's customer service issues like loan officers being unwilling to return calls from individuals who have racially identifiable voices on the phone."
The Housing Equality Center sends testers of different races to inquire about homes and home loans. White testers are more likely to get a call back than Black testers, Wentworth said. And when they do hear back from a loan officer, Black testers are often told they need to submit a full application, credit check, agreement of sale on a home, or documents regarding their income and assets - while white testers are quickly pre-qualified for a loan without even providing a credit check.
"I had to sign my whole life away," Gardner said.
Wealth gap blocks generational wealth building
When a Black applicant's loan is denied in Philadelphia, it is more likely to be due to credit history, employment history, insufficient cash for down payment and closing costs, debt-to-income ratio, or unverifiable information, than when a white applicant's loan is denied, according to the 6abc analysis.
High debt-to-income ratios, low credit scores, and inability to afford down payments are common among Black prospective homebuyers, according to Lydia Pope, President-Elect of the National Association of Real Estate Brokers (NAREB), a minority trade association that promotes democracy in housing. Pope noted there is often a lack of resources within Black communities to help borrowers overcome these barriers, and even if they do get approved for loans, they are charged higher fees due to risk-based pricing.
"We're losing opportunity to grow generational wealth," Pope said.
Across the country, Black people tend to have lower credit scores than their white counterparts. Experts say this stems from the intergenerational wealth gap between white and Black Americans, as well as limited access to traditional financial services in majority-Black neighborhoods.
Black Americans who applied for credit in 2020 were more than twice as likely to be denied as white Americans who applied, according to survey data from the Federal Reserve. This gap grew as respondents' income levels increased. Also, Black Americans' typical net worth is a fraction of the typical net worth of white Americans, the Federal Reserve found.
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"Because of your financial struggles, with your financial profile, you might be able to only access a certain kind of mortgage product, or you might be made to believe that you can only access a certain kind of mortgage," said Abraham Reyes Pardo, Director of Housing at the Urban League of Philadelphia, which helps families build wealth through homeownership. A higher credit score allows applicants to get a loan with a lower interest rate, so they end up paying less overall, he added. "So what we have noticed historically, is some of our African American individuals and families end up paying more money over the life of the loan."
In addition to paying more, Black borrowers may be more likely to be rejected when they make an offer on a home because of their mortgage type.
"Oftentimes, borrowers of color do need to rely on federally-backed mortgages like FHA loans, which require a much lower down payment than conventional mortgages and a lower credit score as well," said Chelsea Barrish, Vice President of Program Impact at Clarifi, a Philadelphia nonprofit that combats housing inequities through financial counseling and support services. "Because of the pressure that's put on the housing market right now, sellers are oftentimes rejecting FHA pre-approved borrowers in favor of conventionally approved borrowers, which is boxing out many minority potential homeowners in the city," she added.
Working towards solutions
Clarifi and the Urban League of Philadelphia help prospective borrowers build their credit and teach them about the different types of loans available to them. The Urban League's housing counselors walk through clients' credit reports with them, helping them understand and address each item. Clarifi's financial counselors explain what payments are factored into clients' credit scores, so they can prioritize which bills to pay and which things to let slide during a crisis.
These organizations also help clients apply for grants to help cover down payment and closing costs on a home. The Urban League has a "very robust network of community partners" that allows them to provide direct financial assistance, Reyes Pardo said. These partners include lenders, City programs and other organizations.
But even if applicants have a good credit score and can afford a down payment and closing costs, they still may end up with an inferior mortgage that will wind up costing them more money and hurting the chances of their offer being accepted by a seller.
When Lydia Pope's niece got a home loan, she had a high enough credit score for a conventionally approved mortgage, as well as a low debt-to-income ratio and enough money for a down payment. Still, her loan officer automatically gave her a Federal Housing Administration-backed loan without even presenting other options. This loan required Pope's niece to pay for private mortgage insurance, while a conventionally backed loan would not have included that cost. Pope believes this happened because her niece is Black.
"Luckily I was there to stop it," Pope said. "What happens to the millions of Black Americans that are denied or given no choice and didn't know that they had a choice?"
Pope believes educating Black communities on the homebuying process and the loans available to them is crucial. The Philadelphia Metropolitan Board of Realtist, NAREB's local chapter, holds homebuying seminars and community events to teach Black Philadelphians what they need to do to secure a mortgage.
"You've got to make sure that your credit is in order, you've got to make sure that you have a great budget financially, you have to make sure that you have a bank account," Board President Sample said. "All of those things are key factors in making sure that the bank then approves your particular loan."
The Board brings lenders and credit counseling agencies to its seminars to help consumers through this process. According to PA Bankers, Philadelphia-area banks offer prospective homebuyer education along with a host of other programs to reduce barriers to homeownership. These include special loan programs, down payment and closing cost assistance grants and interest rate buy-downs. Local banks also partner with nonprofits that facilitate loans and services to consumers who have a hard time qualifying for a mortgage. Sample has hope that these efforts can help close the racial gaps in home loans.
"As the world becomes Black- and brown-er, you're seeing banks are willing to do this now - are willing to have seminars, are willing to open up their doors to alternative forms of credit," Sample said. He believes banks are starting to realize that "it's important, you know, to have African American, Black and brown folks in homes. It's important to the economy, it's important to the community. It's important that you own your home."
Gardner knows just how important it is to be a homeowner, and her reason why is printed on her T-shirt: "It's about generational wealth for me."
Instead of throwing away money to rent each month, she said, "I'll be pouring back into our family." Most importantly, owning her home allows her family to live in safety and dignity, she added.
Gardner and her brother are now planning to help other families like theirs navigate the homebuying process so they can have safe places to live.
"For us, this now has become personal," Gardner said.
This report was produced with data from the Equity Report, a tool created by data journalists at Action News and our ABC-Owned Television Stations across the country. Now this database is available to officials working on solutions and to the public. You can go to https://ouramericaabc.com/equity-report to find the Equity Report. There you will be able to review equity data from various regions including the Philadelphia area. You will have access to local data measuring equity in five categories: Housing, Health, Education, Policing and Environment.