Mar 14


Mortgage lending lags to Black applicants in Buffalo

It's tougher for African-Americans in Erie and Niagara counties to obtain a home loan than in almost any other metro region in the nation, according to an Investigative Post analysis.

This is the first of two stories on the impact of lending practices on homeownership by Black residents in Erie and Niagara counties. The second story, outlining possible solutions, is here.

Black applicants are twice as likely to be denied a home mortgage as the overall population in Erie and Niagara counties, an Investigative Post analysis has found.

What’s more, the region’s 18 percent rejection rate for Black applicants in 2022 was higher than in all but a handful of other major metro areas nationally. 

The gap between the denial rate for Black applicants and the overall mortgage denial rate in the Erie-Niagara region – 18 percent vs. 9 percent – was the widest found in the top 50 metro areas.

“Buffalo especially is a place where Black borrowers are more likely to be denied things like a mortgage, compared to white borrowers. Now, this is obviously true across the country and that’s a really unfortunate fact, but it seems to be especially egregious in places like Buffalo,” said Jacob Channel, senior economist at LendingTree, an online-lending marketplace based in North Carolina.

Income disparities are partly to blame, mortgage analysts and community leaders say. Median household income for whites is almost double that of Black households in Erie and Niagara counties, according to census data. 

But other factors – including remnants of historic redlining – also play a role, they say. 

“To say that redlining doesn’t happen today — maybe not outright, where we are continuing to put red lines on maps — but it does happen in the banking system in all sorts of ways,” said Kathryn Franco, former president of the Buffalo Niagara Community Reinvestment Coalition.

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Banks and other lending companies deny redlining or otherwise discriminating, with all contacted saying they are committed to equality and helping more people own their own homes.

“Any decision to deny an applicant is based solely on the financial information and data associated with the applicant,” KeyBank, one of the largest lenders in the region, said in response to recent criticism. Other banks offered similar statements. 

Investigative Post reported in November that Black homeownership rates have stagnated in Buffalo and Erie County over the past four decades. About a third of Black households own their own homes, compared with half of white households in Buffalo and almost three fourths in Erie County, according to census reports.

As a follow-up to that report, Investigative Post analyzed the most recent federal Home Mortgage Disclosure Act data from 2018 through 2022 for Erie and Niagara counties, as well as 2021 and 2022 data for the top 50 metro areas in the United States.

Among the findings:

  • Black borrowers account for a small portion of home mortgages — usually less than 5 percent — issued by most of the region's largest financial institutions. That includes KeyBank, the area’s second largest bank, which rejected 27 percent of Black applicants.
  • Nonbank lenders such as Hunt Mortgage generally issue a lower percentage of their loans to Black applicants than do banks. They are more likely to issue loans that are easier to qualify for, but can carry more fees, costing borrowers more money over time.
  • High debt-to-loan ratios, followed by credit history and lack of collateral are most often cited as reasons for loan denials for Black applicants, as well as white.
  • Black mortgage applicants are less likely to be rejected in almost a dozen other metro areas with incomes comparable to those in Erie and Niagara counties.
  • Black homebuyers in the Erie-Niagara region apply for mortgages at roughly half the rate of whites. The lower application rate combined with a higher denial rate has stalled homeownership.

The analysis also found the 9 percent loan rejection rate for all races in Erie and Niagara counties in 2022 was in line with the national average. But the 18 percent Black denial rate in the Erie-Niagara region surpassed the 14 percent average denial rate among the top 50 metro areas surveyed nationally. Only the New Orleans, Miami, Detroit and Austin, Texas, regions rejected Black loan applications at a higher rate than Erie-Niagara. 

The issues raised are complex, according to analysts and community leaders.

Income disparities are a leading contributor to lower homeownership and loan approval rates, Franco said.

“A lot of people look at our rental market right now and they say just go buy a house. If rent is too high, go buy a house because the burden is less there. It’s not that easy though, in part because we don’t see wages growing with our housing market,” she said.

 But to blame just income for low Black home ownership rates is too simplistic, analysts and community leaders said. They point to, for example, the almost dozen metro areas with similar Black incomes but lower loan rejection rates in 2022 than Erie and Niagara counties.

Among them are the Cleveland, Cincinnati, Milwaukee, Indianapolis and Pittsburgh regions. All have Black median household incomes below the national average, and even below the Erie-Niagara median in a few cases.

Their financial institutions are less likely to reject Black loans than those in the Erie-Niagara region, Investigative Post found.

“I think there’s always been an issue. I don’t know if it’s ever going to change because it seems as though in the banking sector, it’s about the bottom line,” said University District Council Member Rasheed Wyatt.

Wyatt is a former president of the Urban Bankers Association (now the Urban Financial Services Coalition) and spent a portion of his career in mortgage banking before joining the Common Council. 

“I understand it; I may not agree with it, but I think there are opportunities that we could do better,” he said.

Banking leaders

A decade ago, the New York State Attorney General’s office sued Evans Bank and Five Star Bank, accusing them of not making loans in predominantly Black neighborhoods — basically redlining — in Buffalo and Rochester, respectively. Without admitting guilt, the banks entered into settlement agreements requiring each to expand their efforts into minority communities.

Today, Evans and Five Star banks, along with Bank of America and M&T Bank, have the strongest records of issuing home mortgages to Black borrowers in Erie and Niagara counties, the Investigate Post analysis found.

Bank of America offers programs targeting potential homeowners unable to cobble together a downpayment and closing costs, but who otherwise can afford a mortgage. Evans Bank is working with Buffalo officials on a new housing development on the city’s East Side. M&T meets with advocacy groups nationwide to identify community needs in historically underserved areas. Five Star Bank expanded its footprint into minority areas.

“Five Star serves minority communities, including those in Buffalo, in an exemplary manner,” the state Department of Financial Services wrote in a 2021 report.

Some lenders lag

Overall, Black home loans in Erie and Niagara counties represented about 7 percent of applications, and 6 percent of issued loans, or originations, in 2022 — up from roughly 5 percent of applications and 4 percent of originations in 2018.

But more than half of the 20 largest lenders didn’t reach those averages, Investigative Post found.

Of these, KeyBank has received the most attention.

The National Community Reinvestment Coalition, a Washington D.C.-based advocacy group, partnered with KeyBank in 2016 on a $16.5 billion community benefits agreement with an emphasis on expanding resources to underserved communities. 

But the relationship soured after the bank changed the focus of the agreement to concentrate less on lending to underserved borrowers and more on unrelated initiatives like renewable energy investments, according to the coalition’s president, Jesse Van Tol.

“There was a commitment at the beginning to do a better job of lending to people of color and to low- and- moderate- income people. But as the bank leadership changed, it was clear that the way they were growing the bank didn't emphasize those populations, regardless of what the plan said,” Van Tol told Investigative Post.

 The coalition accused KeyBank twice of discriminatory mortgage lending within the past couple of years, first in May 2022 and again last November. The 2022 report claims the bank had been “effectively walling out Black neighborhoods in several cities,” including Buffalo, its second-largest market.

A spokesperson for KeyBank told Investigative Post in an emailed statement that the bank “strongly disagrees” with the coalition’s reports.

“We do not redline in Buffalo or anywhere else we do business,” KeyBank’s statement said. “Specifically in Buffalo, we have seen positive trends in our home lending performance within majority-minority communities and with Black borrowers.”

The bank said it has in the past two years implemented programs aimed at underserved communities, and has placed a financial coach at its East Delavan Avenue branch to assist prospective homebuyers. While the bank did not provide a racial breakdown for the programs, KeyBank said its Black loan activity increased in 2023, and indicated that when 2023 numbers are finalized, the bank anticipates a spike in Black applications and home mortgages.

An Investigative Post analysis of mortgage data found that of 3,400 home mortgages KeyBank issued in Erie and Niagara counties between 2018 and 2022, fewer than 100 — just under 3 percent — were to Black borrowers, with KeyBank denying over 25 percent of Black loan applications. 

KeyBank’s mortgage originations for Black borrowers decreased each consecutive year since 2018, Investigate Post found. In 2022, the latest year available, 2.1 percent of home loans went to Black borrowers.

In response to criticism received in Buffalo and in other communities, KeyBank said it commissioned a racial equity audit to assist the bank with its diversity, equity and inclusion priorities. The bank said it anticipates publishing the audit results in the middle of this year. 

Some banks with low lending rates to Black borrowers have little presence in Black communities.

Citizens Bank, for example, has some 30 branch locations in the Erie -Niagara region, none on the East Side of Buffalo. 

Over a five-year period, Citizens received 2,200 mortgage applications, including roughly 100 from Black applicants. Fifty-four loans were issued to Black borrowers, accounting for 3.5 percent of the bank’s mortgage originations from 2018 to 2022.

During that period, Citizens Bank rejected 37 percent of Black loan applications — more than twice the regional average for Black applicants.

The bank also rejected more than twice the average of white applicants, 264, or 16 percent.

“Citizens is committed to serving our entire community and providing financing programs that allow all families to become homeowners,” a spokesperson for Citizens Bank said in a statement.

While bank representatives didn’t address mortgage rejection rates or a lack of full service branches in minority communities, they said Citizens Bank has a footprint in underserved communities. 

“Citizens remains committed to strengthening the Buffalo community and directly supports several local organizations through funding and volunteerism, many of which support the East Buffalo area,” the statement said.

Not just the banks

The New York State Department of Financial Services found in 2021 that among the region’s lenders, nonbanks were generally weaker in lending to minorities and in minority communities than the region's banks.

One of the lenders singled out was Hunt Mortgage, which the department called out for poor performance in diversified lending. Although no intentional wrongdoing was found, Hunt entered into a settlement with the state to increase efforts to expand its service area and increase marketing to minority communities.

“The Department concluded that weaknesses in Hunt Mortgage’s fair lending and compliance programs — and a lack of sufficient attention to fair lending issues— generally contributed to Hunt Mortgage’s poor performance in lending to minorities,” the report said.

The most recent data show the number of homeowner loans Hunt issued to Black applicants has dropped over the past three years along with its loans overall. Of 819 loans Hunt issued in 2022, 35 — or 4.3 percent — went to Black applicants, the same percent as in 2020, when 1,023 loans were issued overall, including 44 to Black applicants.

Hunt did not respond to Investigative Post’s request for comment, but in 2021, a company official told The Buffalo News: “We see this as an opportunity to implement programs to strengthen our service in all of our communities, especially those that are underserved. We are looking at this as a positive to help."

Some, like Drew Scott, attribute the poor performance of nonbanks to a lack of presence in underserved communities, like Buffalo’s East Side and Lower West Side. Scott is the president of the Erie-Niagara Board of Realtist, a local branch of the National Association of Real Estate Brokers.

“When you talk about mortgage loan companies,” Scott said, “other than probably two that happen to be downtown right now that just got here within the last two years, you don’t hear of mortgage lenders, you don’t hear of mortgage brokers, in the community.”

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