CLEVELAND, Ohio â€” Maple Heights Mayor Annette Blackwell compares mortgage lending discrimination to being diagnosed with asthma.
Youâ€™re prescribed breathing treatments, but you ignore your doctorâ€™s orders, then wonder why you keep having attacks.
She said that in her southeastern suburb, white residents left and took their wealth with them. Redlining persisted. And today, many residents â€” most of whom are black, many of whom are single, working women with families â€” struggle to attain homeownership, in large part because banks will not lend them money.
â€œWe know whatâ€™s wrong in our communities,â€ said Blackwell. â€œAre we going to administer the medicine?â€
Now, with momentum building around the need for greater access to credit in underserved communities, some local housing advocates have at least one fix in mind.
Cuyahoga County is in the bidding process for a new bank, and advocates see the search as an opportunity to leverage local banks to meet unmet credit needs. Those shortages are in the low- and moderate-income, predominantly African American neighborhoods where they say lack of access to home purchase and repair loans is stymieing any housing market recovery.
â€œThis is an unprecedented moment for the county to really start a conversation with these institutions,â€ said Sally Martin, South Euclidâ€™s housing director and a member of several groups that promote community reinvestment. â€œWhen thereâ€™s huge money on the table, thatâ€™s the time to talk.â€
County officials have not said how advocatesâ€™ recommendations might be taken into consideration. The county treasurerâ€™s office, which is overseeing the bid process and will negotiate the contract, said the countyâ€™s first priority is making the choice that makes the best financial sense.
But there may be some appetite among County Council members to include community lending in the discussion.
â€œMeaningful partnerships between lending organizations, local government and community based organizations can provide the foundation for equitable development of our local economies,â€ council President Dan Brady said in a statement. â€œI look forward to the introduction of our banking services proposal, and I hope that through that contract, the county can leverage the strength of its substantial deposits to encourage inclusive lending activity.â€
The county has more than $800 million in active funds, according to the request for proposals for banking and treasury services it sent out in June, a process it is required to go through every few years.
It is now in the process of reviewing the six bids it received from Chase, Dollar Bank, Huntington, KeyBank, PNC and U.S. Bank. A recommendation is slated to land in front of County Council later this year, then a contract with one or more banks will be negotiated â€” a process in which advocates hope to be included.
Advocates say they have been pushing local banks, and local governments with banking relationships, to improve community lending for years. Recently, new research on racial and geographic disparities in mortgage lending has brought additional attention to the issue.
â€œI would say itâ€™s been a slow movement. Maybe weâ€™re inching our way to success,â€ said Barbara Anderson, co-chair of the Greater Cleveland Reinvestment Coalition, which promotes investment and access to credit in low- and moderate-income communities. â€œI do believe they [local government officials] are more receptive now than they have been in the past. I think a lot of that is because of the data analysis.â€
Frank Ford, senior policy adviser at the nonprofit Western Reserve Land Conservancy, recently released new research on home mortgage lending in Cuyahoga County based on an analysis of the most recent data lenders have to submit to the federal government.
Ford found stark differences and a â€œtragic ironyâ€ in lending patterns based on borrowersâ€™ race and where they lived.
Predominantly black neighborhoods in Cuyahoga County were denied loans for decades, then disproportionately targeted for subprime loans, leading to higher rates of foreclosure as the housing market collapsed in 2008.
â€œNow, at a time when low home sale prices could mean an opportunity for homeownership, the low prices are working against these communities,â€ Ford wrote, because lenders tend to avoid small-dollar loans and cash investors often swoop in and buy up low-cost properties before homebuyers can get a loan.
Mayor Blackwell has seen this firsthand in her community, where she often talks to residents who have rented for years and want to know how they can buy a home in Maple Heights, where many houses are valued at $50,000 or less. â€œThe issue for us has been banks not lending for loans in those smaller amounts,â€ she said.
For example: the Citizens Bank branch on Broadway Avenue that, before it permanently closed, made only seven loans in Maple Heights in 2017.
Along racial lines, the lending disparities in Cuyahoga County are wide. Not only are black borrowers rejected for home purchase and home improvement loans at about double the rate of white borrowers, but higher-income black borrowers are rejected at higher rates than white borrowers with lower incomes.
For example, across the board, 13% of high-income black borrowers were denied home purchase loans in 2017. Only 9% of moderate-income white borrowers were denied.
It is illegal under federal law for lenders to discriminate based on race. However, lenders are required to ask about borrowersâ€™ race, for data they must collect and submit to the federal government.
The local disparities Ford found hold true, in some cases, for loans made by local banks that have agreements in place in which they have committed to improving their lending performance. KeyBank, for example, in 2017 rejected home purchase loans for moderate-income black borrowers at a ratio of nearly seven-to-one compared with white borrowers with the same income level.
Ford also found disparities in lending in parts of the county with larger African American populations.
Borrowers on the East Side of Cleveland, for example, received 47% of loan dollars they applied for in 2017, compared to 64% in the county overall. And only 13% of home sales on the East Side in 2017 were supported by a loan, compared to 53% on the West Side and a high of 83% in the outer suburbs.
And most striking, Ford wrote, is the disparity in access to home improvement loans.
â€œThe regions of Cuyahoga County in most need of rebuilding their housing markets, the East inner suburbs and the East Side of Cleveland, have the least access to home repair loans to maintain their housing,â€ he said.
Itâ€™s these disparities that have local advocates pushing financial institutions to improve their community lending track records, and encouraging local government to use its leverage to get results.
Advocates say they were pleased when the county asked bidders for the banking contract several questions related to community lending.
In one section that counts for about 7% of the applicantâ€™s score, the county asked:
â€¢ â€œDescribe your bankâ€™s lending within Cuyahoga County for small business, home mortgages, and home repair. Specifically, what does your bank do to foster these lending practices in low-income and high-minority areas within Cuyahoga County?â€
The county also asked applicants to provide maps of their physical bank branches in Cuyahoga County, and to provide three yearsâ€™ worth of Community Reinvestment Act ratings and Home Mortgage Disclosure Act data.
County Treasurer Chris Murray said the request for CRA data was added â€œbecause we wanted to get a clearer understanding of what our potential partners are currently doing throughout the county.â€
Although that part of the bid counts toward a small part of its overall score, Murray said it could â€œtip the scales one way or the other if weâ€™ve got bids that are fairly close in all other aspects.â€
But where advocates see the biggest opportunity for change is in the countyâ€™s contract negotiations with the bank or banks it selects.
As such, a group of county housing stakeholders and the GCRC drafted a list of recommendations for the contract and submitted it to the county in August.
One recommendation is that any bank contracts should include annual lending performance goals in a number of categories, such as home purchase loan originations on the East Side, to low- and moderate-income borrowers and for $50,000 and less, among others.
The group also recommends the county select more than one bank, shorten the length of its banking contracts and require banks to submit detailed lending data to the county.
Another proposal is to establish a citizen advisory committee â€œto assist the county in making sure that the credit needs of underserved communities, and in particular the historically unmet credit needs of African American borrowers and communities, are being met by the banks who are awarded the privilege of holding Cuyahoga County funds.â€
Advocates would also like to see annual public hearings and report cards for lenders and a yearly countywide data review of institutions that make loans.
â€œWe want the opportunity, on the back end, to help formulate this contract and have some meaningful metrics and public accountability,â€ said South Euclid housing director Martin, who helped write the list.
What the county will do with these recommendations remains to be seen.
Asked whether any enforcement mechanisms such as those proposed by advocates would be included in any new banking services contracts, Murray said they â€œcould beâ€ but, â€œWhile thatâ€™s a possibility, the contract has not been written.â€
He emphasized that the countyâ€™s top priority is selecting a bank or banks that provide the best economic and service benefits to the county.
â€œWeâ€™re not making any promises to the financial institution, nor are we making promises about any of this to advocates, but I think we hear them loud and clear,â€ said county spokeswoman Mary Louise Madigan.
Whether or not the county presses its banking partners to expand lending, communities in Cuyahoga County â€” including Maple Heights â€” are considering leveraging their own relationships with banks to make change.
â€œIâ€™ve heard the word redlining all my life,â€ Mayor Blackwell said. â€œWhen are we going to do something about it?â€