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Loans tougher for SCV blacks

Posted: November 14, 2009 7:32 p.m.
Updated: November 15, 2009 4:55 a.m.

Clarita had a higher median income than any other ethnic group in the city — but were also almost twice as likely to be turned down for loans, according to a city-commissioned fair housing report.

The local statistics mirror a national trend in which minorities tend to have a tougher time securing loans, said Heidi Aggeler, director of housing and human services for BBC Research and Consulting, which was hired by the city to write the report.

“The findings are real typical of any community,” Aggeler said.

The report used numbers from 2007 that showed while blacks made up about 3 percent of the city’s population, their median household income was slightly more than $100,000 a year. The median for all of the city’s residents was $79,000.

Meanwhile, national lenders denied about 37 percent of loans to black applicants in the city, compared to 20 percent for all residents.

The top 10 lenders to city residents were national giants, including Wells Fargo, Washington Mutual and Bank of America, Aggeler said.

City officials noted lending practices are well outside of the city’s jurisdiction — more of an issue for Wall Street in New York than Main Street in Newhall.

A national trend
According to data from the Federal Financial Institutions Examination Council, loans from black households nationwide were denied by lending institutions about 32 percent of the time in 2007. About 16 percent of whites’ loans were denied by lending institutions in the same year.

Aggeler said the local report’s numbers are incomplete and cannot conclusively show blacks have been discriminated against by financial institutions in the city.

Only about half the loans reviewed for the report requested that applicants list their race. One out of three loan applications from local Latinos were also denied, the report said.

NAACP’s response
Leon Jenkins, the president of the Los Angeles chapter of the National Association for the Advancement of Colored People, said he and his staff are currently reviewing the report.

Jenkins said the numbers seemed to be a sign of overt discrimination.

“At the very least the city attorney should look into this,” Jenkins said. “If they don’t, we will.”

Jenkins said discriminatory lending practices, besides being illegal, deprive minorities access to better schools and to property that is more valuable, appreciates faster and is located in areas that have lower crime rates.

City takes action
City of Santa Clarita officials, who received the report Oct. 14, said they are currently working on a five-year plan of action to address the issues the report raises.

The city’s role in issues dealing with the market is limited mostly to education, said Erin Lay, community development and housing program administrator.

“Lending is an enormous issue that is well out of the breadth of what the city addresses,” Lay said. She said the city worked closely with the consulting firm that put together the report for six months before it was completed.

James Hicken, president and chief executive officer for the Bank of Santa Clarita, said community bank lending practices aren’t examined in the report.

“This is not a community bank or small bank issue because they don’t make these types of small residential loans,” Hicken said.

He said the bulk of lending detailed in the report was most likely handled by large lending and mortgage firms that are based outside the Santa Clarita Valley.

Hicken, who has been a banker in Santa Clarita since 1996, said he would be shocked if discriminatory lending practices were occurring in the city.

However, on the surface, the figures in the report are alarming and require further study before any conclusions can be made, he said.

“When you look at the stats it really raises the eyebrow,” Hicken said.

‘Why’ not explored

While the report may show a strong correlation between lending and race, it doesn’t show why blacks were denied loans at higher rates than whites, said Tracy Seslen, assistant professor of finance at the University of Southern California school of business.

The 2004 fair housing report shows blacks were denied loans 21 percent of the time in 2001. In the same year, whites were denied loans 9 percent of the time.

The 2004 report also notes that middle- and higher-income blacks and Hispanics in Los Angeles County were more than two times more likely than their white counterparts to receive subprime loans.

Subprime loans often have higher interest rates than conventional loans and are a major contributing factor to the housing crisis, Seslen said.


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