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For generations, homeowners in mostly Black areas of Cleveland and the East Side inner-ring suburbs have complained that getting a bank loan to replace a roof, fix a dilapidated porch or make other essential repairs is extremely difficult.
Bạn đang xem: Banks denied repair loans to Black Greater Cleveland homeowners
Government data that tracks bank loans across the country shows how lopsided lending has been in Cuyahoga County: Nearly 92% of all home improvement loan dollars have gone to residents in overwhelmingly white areas.
Austin Cummings, a senior research associate at the nonprofit Fair Housing Center for Rights & Research, analyzed several years of recent home improvement loan data for a report released in May.
“I was like, ‘Whoa, stop,’” Cummings said. “Is this actually true? Then I redid everything.”
He got the same results.
Signal Cleveland is digging into affordable housing with: The Housing Squeeze.
Stories in the series examine Cleveland’s affordable housing landscape through the experiences of renters and homeowners and with an eye toward solutions.
Fair housing advocates like Cummings are pushing to get government and financial institutions to address long-running racial disparities in home improvement loans.
Earlier this year, there was an opportunity for some homeowners to get help that hasn’t been available from banks. The Fair Housing Center got the chance to reinvest about $650,000 in parts of Cleveland and the East Side suburbs. These were the areas that were hardest hit by racially discriminatory mortgage lending after the 2008 foreclosure crisis.
The money came from a $53 million national settlement that nonprofit housing groups reached with Fannie Mae, a government-sponsored enterprise that does mortgage financing. The settlement followed a lawsuit that detailed how the lender allowed homes it foreclosed on in mostly Black or Latinx neighborhoods to deteriorate while maintaining and marketing similar homes in mostly white neighborhoods.
The Fair Housing Center teamed up with the Home Repair Resource Center in Cleveland Heights to offer home improvement grants of up to $10,000 to about 65 homeowners. Based on community input, the groups decided to offer the grants in neighborhoods where a lack of available loans had contributed to lower property values and undermined neighborhood stability.
Homeowners responded enthusiastically to the announcement of the Black and Latinx Community Investment Fund. The fund received about 10 applications for each available grant. Though the fund stopped accepting applications this spring, homeowners are still trying to apply. Grants have gone to mostly retired or working-class homeowners.
Housing advocates hope that the success will amplify the need to address this longstanding racial lending disparity and offer a solution that can be expanded.
Credit: Kenyatta Crisp
How the Black and Latinx Home Repair Fund made a difference for one East Cleveland resident
Stephanie Stedmire-Walls has lived in her East Cleveland home for more than 45 years. In that time, she has witnessed nearly every cause of neighborhood blight and deterioration from institutional disinvestment to neglectful absentee landlords. She’s also seen what can happen when homeowners can’t get loans and face unfair judgment from outsiders.
Such outsiders might have looked at her dilapidated porch and labeled Stedmire-Walls as someone who didn’t care about her property. The wooden steps were caving in. The banister wobbled. The paint was peeling.
“Oh, my goodness,” she said with a sense of embarrassment. “There was this big lump in my porch [floor] where people would trip trying to get to the front door.”
Stedmire-Walls was frustrated by the porch’s condition, but she didn’t have the money to fix it. She hired people to do the work in pieces so she could afford to pay. But that resulted in shoddy workmanship with substandard materials.
“I never applied for a bank loan because I knew I would be denied,” said the East Cleveland school board member. “I’m a retired social worker living on Social Security.”
Stedmire-Walls gets giddy describing her porch after its makeover, which the grant paid for. The floor is sound, the concrete steps are sturdy, and the banister, which even has solar lights, is steady.
Stedmire-Walls said neighbors “oohed and ahhed” when her porch was completed a few months ago. Neighbors told Stedmire-Walls that they wanted to see more programs such as the Black and Latinx fund help them fix their homes.
‘Overwhelming’ response to home repair grants
When the Home Repair Resource Center began accepting applications for the new Black and Latinx home repair fund this spring, nobody knew what the demand would be. The center had to stop accepting applications within a few weeks.
“It was very overwhelming, to say the least,” said Keesha Allen, executive director of the nonprofit Home Repair Resource Center, which is distributing the grants. “It’s just been really amazing to be able to help so many folks, but it’s also been so disheartening to turn away folks.”
Eleanor Wynter of Maple Heights was among those who got a grant. Some of the floors in her home were slanting from an addition constructed more than 20 years ago – before she owned the home. The retired registered nurse had tried to get a home improvement loan. She said banks offered loans against the equity in her house. She was also given the option of taking out money for repairs after refinancing her mortgage. But the rate would have been substantially higher than her current 4%. Wynter wanted neither.
“If my credit score was good enough for these, why wasn’t it good enough for a home improvement loan?” she said.
Wynter said banks never gave her a clear answer.
Do banks need to change how they evaluate borrowers?
How banks and other financial institutions evaluate borrowers is key to many housing advocates’ fight to increase home improvement loan rates among Black and Latino residents.
Like many advocates, Cummings said lenders overemphasize credit history. Getting a complete picture of how a credit score is determined, he said, is difficult because the formulas used by the companies that score would-be borrowers are usually proprietary. His report found that 57.8% of Black applicants were denied loans because of credit history, while only 41.4% of white applicants were.
“We’re letting three digits determine a lot of what is considered creditworthiness,” he said.
‘Clear winners’ and ‘clear losers’ when it comes to lending
Cummings’ May report looked at home loan lending in the county, including loan origination and denial rates. Loan origination focuses on the loan application and approval processes. Cummings analyzed federal Home Mortgage Disclosure Act data collected for home improvement loans made in Cuyahoga between 2019 and 2022, which he said nationally was a time of unprecedented home repair and improvement spending.
The study did not look at the track records of individual banks making loans in Cuyahoga County. It primarily focused on loans made to Black and white residents because of Cuyahoga’s small Latino population.
“There are clear winners and there are clear losers,” Cummings said. “As Black neighborhoods and Black borrowers are systematically being denied opportunities to access home improvement loans, they are not being allowed to accrue the same benefits of homeownership as their white peers.”
Read the report: Retrofitting Racial Disparities: Home Improvement Lending Outcomes in Cuyahoga County
The study also found that:
- Black applicants were denied home improvement loans at higher rates than their white counterparts. The largest gap between Black and white denial rates was among the highest earners, or those making above $72,000 annually.
- Homeowners in the outer suburbs – both East and West – had the best chance of getting home improvement loans. These areas tend to be overwhelmingly white and more affluent. For example, only 32% of loans were rejected in the outer suburbs, while 50% were rejected in East Side inner-ring suburbs.
- Black homeowners were more likely to be denied loans because of credit history than white homeowners but less likely to be denied for such things as debt-to-income ratio and having collateral. This ratio is calculated by totaling a homeowner’s monthly debt payments and dividing them by the person’s gross monthly income.
- Black homeowners were not denied loans as often as their white counterparts when it came to carrying debt. Having a good debt-to-income ratio is often seen as a marker of financial health. While 24.3% of white applicants were denied loans for this reason, only 18.6% of Black applicants were.
- Black applicants were denied loans even when they had the same or similar incomes as white applicants.
A more ‘holistic’ financial assessment helped homeowners successfully repay loans
For about 50 years, the Home Repair Resource Center ran a low-interest home repair loan program, in which about 94% of the loans were repaid, according to Allen.
The program had ways of assessing an applicant’s financial health that aren’t commonly used by banks. This includes reviewing bank statements to get a sense of the applicant’s financial situation. If there was a late payment or something that could affect a credit score, the center would ask the applicant to explain what had happened.
A repayment plan would be based on a “holistic” financial assessment. The center would work with the borrower on budgeting how to repay the loan.
“We treated Ms. Smith like a person,” Allen said, using a hypothetical client. “The bank would say, ‘Ms. Smith has a 570 credit score and her debt-to-income ratio is 50%. She doesn’t make enough money to support a loan payment, so we’re going to reject her.”
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