Fifty years after the federal Fair Housing Act banned racial discrimination in lending, African Americans and Latinos continue to be routinely denied conventional mortgage loans at rates far higher than their white counterparts.
This modern-day redlining persisted in 61 metro areas even when controlling for applicants' income, loan amount and neighborhood, according to millions of Home Mortgage Disclosure Act records analyzed by Reveal from The Center for Investigative Reporting.
The yearlong analysis, based on 31 million records, relied on techniques used by leading academics, the Federal Reserve and Department of Justice to identify lending disparities.
It found a pattern of troubling denials for people of color across the country, including in major metropolitan areas such as Atlanta, Detroit, Philadelphia, St. Louis and San Antonio. African Americans faced the most resistance in Southern cities - Mobile, Alabama; Greenville, North Carolina; and Gainesville, Florida - and Latinos in Iowa City, Iowa.
No matter their location, loan applicants told similar stories, describing an uphill battle with loan officers who they said seemed to be fishing for a reason to say no.
"I had a fair amount of savings and still had so much trouble just left and right," said Rachelle Faroul, a 33-year-old black woman who was rejected twice by lenders when she tried to buy a brick row house close to Malcolm X Park in Philadelphia, where African Americans were 2.7 times as likely as whites to be denied a conventional mortgage.
In the 1930s, surveyors with the federal Home Owners' Loan Corporation drew lines on maps and colored some neighborhoods red, deeming them "hazardous" for bank lending because of the presence of African Americans or European immigrants, especially Jews.
Redlining has been outlawed for half a century. And for the last 40 years, banks have had a legal obligation under the Community Reinvestment Act to solicit clients - borrowers and depositors - from all segments of their communities.
But in many places, Reveal found the law hasn't made much difference.
The analysis - independently reviewed and confirmed by The Associated Press - showed black applicants were turned away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three. In Washington, D.C., the nation's capital, Reveal found all four groups were significantly more likely to be denied a home loan than whites.
"It's not acceptable from the standpoint of what we want as a nation: to make sure that everyone shares in economic prosperity," said Thomas Curry, who served as America's top bank regulator, the comptroller of the currency, from 2012 until he stepped down in May.
Yet Curry's agency was part of the problem, deeming 99 percent of banks satisfactory or outstanding based on inspections administered under the Community Reinvestment Act. And the Justice Department sued just nine financial institutions for failing to lend to people of color under the Obama administration.
Curry argued that the law shares part of the blame; it needs to be updated and strengthened.
"The Community Reinvestment Act has aged a lot in 40 years," he said.
Since Curry departed nine months ago, the Trump administration has gone the other way, weakening the standards banks must meet to pass a Community Reinvestment Act exam. During President Donald Trump's first year in office, the Justice Department did not sue a single lender for racial discrimination.
The disproportionate denials and limited anti-discrimination enforcement help explain why the homeownership gap between whites and African Americans is now wider than it was during the Jim Crow era.
In the United States, "wealth and financial stability are inextricably linked to housing opportunity and homeownership," said Lisa Rice, executive vice president of the National Fair Housing Alliance, an advocacy group. "For a typical family, the largest share of their wealth emanates from homeownership and home equity."
The latest figures from the U.S. Census Bureau show the median net worth for an African American family is now $9,000, compared with $132,000 for a white family. Latino families did not fare much better at $12,000.
Lenders and their trade organizations do not dispute the fact that they turn away people of color at rates far greater than whites. But they maintain that the disparity can be explained by two factors the industry has fought to keep hidden: the prospective borrowers' credit history and overall debt-to-income ratio. They singled out the three-digit credit score - which banks use to determine whether a borrower is likely to repay a loan - as especially important in lending decisions.
"While quite informative regarding the state of the lending market," the records analyzed by Reveal do "not include sufficient data to make a determination regarding fair lending," the Mortgage Bankers Association's chief economist, Mike Fratantoni, said in a statement.
The American Bankers Association said the lack of federal enforcement proves discrimination is not rampant, and individual lenders told Reveal that they had hired outside auditing firms, which found they treated loan applicants fairly regardless of race.
"We are committed to fair lending and continually review our compliance programs to ensure that all loan applicants are receiving fair treatment," Boston-based Santander Bank said in a statement.
New Jersey-based TD Bank, which denied a higher proportion of black and Latino applicants than any other major lender, said it "makes credit decisions based on each Customer's credit profile, not on factors such as race or ethnicity."
Reveal's analysis included all records publicly available under the Home Mortgage Disclosure Act, covering nearly every time an American tried to buy a home with a conventional mortgage in 2015 and 2016. It controlled for nine economic and social factors, including an applicant's income, the amount of the loan, the ratio of the size of the loan to the applicant's income and the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property.
Credit score was not included because that information is not publicly available. That's because lenders have deflected attempts to force them to report that data to the government, arguing it would not be useful in identifying discrimination.
In an April policy paper, the American Bankers Association said reporting credit scores would be expensive and "cloud any focus" the disclosure law has in identifying discrimination. America's largest bank, JPMorgan Chase & Co., has argued that the data should remain closed off even to academics, citing privacy concerns.
At the same time, studies have found proprietary credit score algorithms to have a discriminatory impact on borrowers of color.
The "decades-old credit scoring model" currently used "does not take into account consumer data on rent, utility, and cellphone bill payments," Republican Sen. Tim Scott of South Carolina wrote in August, when he unveiled a bill to require the federal government to vet credit standards used for residential mortgages. "This exclusion disproportionately hurts African-Americans, Latinos, and young people who are otherwise creditworthy."
A CASE STUDY: PHILADELPHIA
Philadelphia was one of the largest cities in America where African Americans were disproportionately turned away when they tried to buy a home. African Americans and non-Hispanic whites make up a similar share of the population there, but the data showed whites received 10 times as many conventional mortgage loans in 2015 and 2016.
Banks also focused on serving the white parts of town, placing nearly three-quarters of all branches in white-majority neighborhoods, compared with 10 percent for black neighborhoods. Reveal's analysis also showed that the greater the number of African Americans or Latinos in a neighborhood there, the more likely a loan application there would be denied - even after accounting for income and other factors.
When Faroul applied for a loan in April 2016, she thought she was an ideal candidate. She holds a degree from Northwestern University, had a good credit score and estimates she was making $60,000 a year while teaching computer programming as a contractor for Rutgers University. Still, her initial loan application was denied by Philadelphia Mortgage Advisors, an independent broker that made nearly 90 percent of its loans to whites in 2015 and 2016.
"I'm sorry," broker Angela Tobin wrote to Faroul in an email. Faroul's contract income wasn't consistent enough, she said. So Faroul got a full-time job at the University of Pennsylvania managing a million-dollar grant.
But that still wasn't enough. When she tried again a year later, this time at Santander Bank, a Spanish firm with U.S. headquarters in Boston, the process dragged on for months. Eventually, an unpaid $284 electric bill appeared on Faroul's credit report. She paid the bill right away, but it still tanked her credit score, and the bank said it couldn't move forward.
Things suddenly took a turn for the better after Faroul's partner, Hanako Franz, agreed to sign onto her loan application. At the time, Franz - who is half white, half Japanese - was working part time for a grocery store. Her most recent pay stub showed a biweekly income of $144.65. Faroul was paying for her health insurance.
The loan officer had "completely stopped answering Rachelle's phone calls, just ignored all of them," Franz said. "And then I called, and he answered almost immediately. And is so friendly."
A few weeks later, the couple got the loan from Santander and bought a three-bedroom fixer-upper. But Faroul remains bitter.
"It was humiliating," she said. "I was made to feel like nothing that I was contributing was of value, like I didn't matter."
'It's like a glass ceiling'
Contacted by Reveal, the lenders defended their records. Tobin, who turned down Faroul on her first application, said race played no role in the rejection.
"That's not what happened," she said and abruptly hung up. A statement followed from Philadelphia Mortgage Advisors' chief operating officer, Jill Quinn.
"We treat every applicant equally," the statement said, "and promote homeownership throughout our entire lending area."
Faroul's loan officer at Santander, Dennis McNichol, referred Reveal to the company's public affairs wing, which issued a statement: "While we are sympathetic with her situation, we are confident that the loan application was managed fairly."
But civil rights groups said Faroul's experience reflects a pattern of discrimination by banks that keeps people of color from building wealth.
"It's like a glass ceiling," said Angela McIver, CEO of the Fair Housing Rights Center in Southeastern Pennsylvania. "OK, we'll allow you to go this far, but . you're not going to go any further."
This article was provided to The Associated Press by the nonprofit news outlet Reveal from The Center for Investigative Reporting. To read - or publish - a full version of this investigation, go to: revealnews.org/redlining. Curious about lending disparities in your neighborhood? Text "LOAN" to 202-873-8325.
Data reporter Sinduja Rangarajan, senior data reporter Eric Sagara and Associated Press data journalist Angeliki Kastanis contributed to this report.
Aaron Glantz can be reached at firstname.lastname@example.org, and Emmanuel Martinez can be reached at email@example.com. Follow them on Twitter: @Aaron_Glantz and @eman_thedataman