A new report says that outright discrimination known as "redlining" has become rare, but barriers to black homeownership remain.
"Middle-income black applicants from mostly minority areas were more than twice as likely to be rejected for mortgage loans as middle-income whites living in mostly white areas," says a report of a six-month investigation in the April 17 issue of U.S. News & World Report. "For blacks, the rejection rate was 37 percent; for whites, just 18 percent."
The magazine also said that homeowners' insurance on average costs more than twice as much in poor black neighborhoods than in nonminority middle-income neighborhoods. The study conceded that poor areas have a worse claims history than middle-class neighborhoods, but said the price gaps may be bigger than warranted.
The magazine said Baltimore has the third-greatest disparity among U.S. cities between the number of bank branches in mostly white neighborhoods and those in mostly minority neighborhoods. There are nearly six bank branches per 10,000 people in white Baltimore neighborhoods, nearly five times the 1.2 branches per 10,000 people in minority neighborhoods.
Only 28 percent of housing loans go to minority neighborhoods in Baltimore, the magazine reported, despite the fact that 56 percent of the city's houses are in areas where blacks and other minorities are more than 50 percent of the population.
The study did not adjust for the low rate of homeownership from one neighborhood to another, which would skew the number of housing loans actually needed to meet each neighborhood's demands.
Representatives of local banks defended their practices. Signet Bank/Maryland spokeswoman Gail Sanders said every mortgage application declined is put through a second loan review, regardless of the applicant's race. The top reasons for rejections are poor credit and income too low to afford the house the customer wants, she said.
Ms. Sanders said one-third of Signet's Maryland branches serve low- and moderate-income neighborhoods. NationsBank Corp. spokeswoman Jan Boylston said 77 percent of the company's 36 Baltimore branches serve low- and moderate-income areas. Neither bank had information about how many of the branches in poorer areas are in majority-black neighborhoods.
An attorney for State Farm Insurance defended the industry's pricing. "Premiums are computed by territory," State Farm Vice President Leo Jordan said. "If experience in a given area is poor, rates will be higher. Fire losses and crime losses are higher in urban areas, and they are a major component of premiums."
"Redlining" refers to the illegal practice of denying mortgage loans or insurance for homes in specific, usually majority black, areas.