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Red Lines Through Minority Mortgages BY JAMES CULLEN WHEN WILLIAM Paul Thomas of Houston got his first rejection on a home mortgage appli cation in April 1992, despite a family income of $115,000 a year, he thought a visit to the lender would resolve the minor blemishes on his credit report. When Thomas was rejected six months later in his second try to finance the purchase of the Southeast Houston home he was leasing, he realized a complaint that a recent statewide study has substantiated: Making more than $100,000 a year doesn’t guarantee that a black couple can buy a home. A black Texan earning $100,000 a year is still two and a half times as likelyto be denied a home mortgage as a white applicant at a similar income level, the study showed. Overall, black and Hispanic Texans were denied home mortgages at twice the rate of white applicants, even at higher income levels. As might be expected, prospects for approval increased for Hispanics at higher income levels, but they did not match the approval rates for white applicants. Rejection rates actually increased as black income levels rose. While black Texans making less than $25,000 were rejected at 1.5 times the rate of whites at a similar income level, blacks making $25,000 to $50,000 were rejected at 1.91 times the level of similar whites and blacks making $50,000 to $75,000 were rejected at 2.5 times the rate of whites at that income level. Among those earning more than $100,000, 25 percent of black applicants were denied loans, compared with 10 percent of whites rejected at that income level and 16 percent of Hispanics. At all income levels, blacks had higher rejection rates than whites, Hispanics, Asians and American Indians. On behalf of the Texas Community Reinvestment Coalition, made up of 50 housing and civil rights groups, Robert H. Wilson of the Lyndon B. Johnson. School of Public Affairs at the University of Texas analyzed data from 155,348 Texas mortgage loan applications made in metropolitan areas in 1992, as reported by Texas lending institutions to the federal government. The study compared rejection ratios, which were computed by dividing the rejec tion rate of a minority group by the rejection rate for the comparable white group. \(The Wilson, in his report, concluded, “…even when family income is taken into consideration, the rejection ratio of minority groups is much higher than would be expected if no disparity existed.” Studies done by the Wall Street Journal and the Federal Reserve Bank of Boston showed similar disparities according to race. Overall, ASians were rejected at nearly the same rate as whites \(1.02 for Asians vs. and blacks were 2.23 times as likely to be rejected as whites. Rejection ratios also varied by location. Blacks were more likely than Hispanics to get a loan in Bexar and Hidalgo counties, but less likely to get a loan in Cameron County \(as well as Dallas, El Paso, Harris, Hidalgo, County, blacks and Hispanics are denied at the same rate-1.54 times the white rate. Lubbock bankers appeared to like their borrowers white, as blacks in the Hub City were rejected at nearly five and a half times the rate of Caucasians, Hispanics were 2.69 times as likely to be rejected and Asians were 1.83 times as likely to be denied. \(Lubbock bankers didn’t approve any of Cameron County was a pale second with a 3.32 rejection rate for blacks and a 2.1 rejection rate for Hispanics. \(They rejected tion to Lubbock, Asians had the hardest Laura Hale, general counsel for the Texas Bankers Association, said other reasons besides discrimination could explain the discrepancy. Some institutions may have a highter rejection rate because they have engaged in outreach programs into low-tomiddle-income areas, she speculated. But John Henneberger, a spokesman for the Texas Low-Income Housing Information Service, said lenders would have a difficult time explaining away the differences in approval ratios. “Some institutions are just figuring out ways to market their loans without getting ethnic minorities through the doors,” he said. Even the speculation advanced by some bankers that minorities have more credit problems than whites does not justify the difference, Henneberger said. “Eighty percent of applicants have some blemish. The real problem is hoW lenders deal with that for whites versus how they deal with minorities. We feel that whites are given the benefit of the doubt at a much higher rate than minorities.” Thomas was chief of staff for state Senator Rodney Ellis of Dallas in July 1992, when he first applied for the mortgage to buy a house in the middle-class MacGregor Terrace neighborhood near the University of Houston. It was denied, he said, because he had allowed student loans to become overdue several years earlier. When he showed the mortgage officer the student loans had been paid, the officer told him he would watch his credit record for the next six months. In the meantime, Thomas moved to Austin to work for then-U.S. Senator Bob Krueger, while Thomas’ wife, a nursing supervisor at St. Luke’s Hospital for more than 10 years, remained in Houston with their two children. This time, despite their scrupulous payment of bills, the mortgage again was deniedbecause Thomas had changed jobs. “Had I not gone in there and insisted that they follow through on the agreement, I wouldn’t be in that house today,” Thomas said. While he was cooling his heels waiting to see the mortgage officer, he added, a black secretary encouraged him, saying she had seen white applicants come in with bankruptcies and get mortgages. “I used to think making $100,000 a year was a big deal, but it’s not necessarily enough to get you out of a townhouse and into a home of your own…and I know many African Americans don’t have the opportunities I have,” said Thomas, who returned as Ellis’ chief of staff after Krueger’s defeat in a June 1993 special election. “You’d be surprised at how many of us have gone through similar deals, and it’s not just on home loansit’s also in getting cars or other loans.” THE TEXAS OBSERVER 13