Editor’s note: This article is another installment of “Invisible Walls,” is an ongoing joint project of the Granite State News Collaborative, NH Business Review, Business NH Magazine and NH Public Radio that describes how exclusionary zoning laws have reinforced areas of persistent poverty, impacting many aspects of community life, including crime, public health, affordable housing and access to economic opportunity in Manchester. The team used Manchester as a case study, but the same sorts of exclusionary zoning practices present in Manchester are common across the state, and likely have had similarly-broad effects.
Attorney Christine Wellington of Derry has spent a good chunk of her career trying to fight housing discrimination in New Hampshire.
While the state has small Black and Hispanic populations compared to most other states, the ethnic diversity that does exist is largely confined to certain neighborhoods in Manchester, Nashua, Dover and Concord.
Wellington cites many factors as contributing to the concentration of the state’s minority populations in these ethnic enclaves. Marking certain neighborhoods as undesirable for mortgage loans, a practice known as redlining, was banned in 1965, but its legacy remains a factor in Manchester. The phenomenon of “white flight” from the inner city has been well-documented. Zoning that restricts multifamily housing is widespread throughout the state.
One of the most insidious barriers to home ownership for minorities is discriminatory lending, in which loan applications from equally qualified white and non-white applicants are not given equal consideration.
“It’s de facto. It happens,” said Wellington. “It’s one reason the North End of Manchester has become a totally protected, single-family enclave of the most affluent and one of the least diverse sections of the city.”
She came to that conclusion after years of research as the fair housing project director at NH Legal Assistance. In 2015, Wellington co-authored a 2015 analysis of impediments to fair housing for the NH Housing Finance Authority with Dan Feltes, former Democratic state senator and gubernatorial candidate. Dan Feltes later contributed to an update of the analysis in 2020.
After reviewing all home loan data for 2013, the 2015 analysis concluded that ethnicity was the only variable besides household income that was consistently a significant predictor of loan denial.
“In short, in 2013, if you were Latino you were significantly less likely to have access to housing financing,” the report states. “This is true controlling for applicant gender; type of loan (origination v. refinancing); conventional v. government-backed; loan amount; race; denial reason; and geography.”
When the study was updated in 2020, Wellington and her associates noted that little had changed: “Our 2020 analysis echoes the findings of the 2015 assessment: People of color concentrated in the poorest neighborhoods still face the same obstacles outlined in 2015. By every measure, those neighborhoods faced conditions and access to opportunity far below the state average.”
New Hampshire does not have statistically relevant data on Black loan applicants, given that Blacks only comprise 1.8 percent of the statewide population, and around 9 percent in Manchester and Nashua. According to the 2020 Census, Hispanics comprise 7.6 percent of the population statewide, 21 percent in Manchester and 23 percent in Nashua.
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Hard to prove
The Fair Housing Act of 1968, which was passed to fight practices like redlining and discriminatory lending, makes it a federal crime to “discriminate in the terms, conditions, or privileges of sale of a dwelling because of race or national origin.”
Some of the most blatant acts of discrimination have faded since 1968. Lenders don’t pull out redlined maps anymore when considering loan applications, and you won’t see classified ads that say, “Blacks need not apply.” So discriminatory lending is hard to prove, and in many ways operates under the radar of regulators.
A study by Northwestern University professors released in January 2020 found that discrimination in loan denial and cost has not declined much over the past 30 to 40 years. Social demographer Lincoln Quillian and his associates analyzed all credible studies of lending and housing trends since the late 1970s to the present.
“We find declines in most forms of discrimination, especially the more extreme forms, like falsely claiming an advertised unit is no longer available,” said Quillian, lead author of the study and professor of sociology in the Weinberg College of Arts and Sciences at Northwestern. “There is less reduction and considerable persisting discrimination in more subtle differences in treatment between whites and minorities.”
When it comes to mortgages, researchers found that racial gaps in loan denial have declined only slightly: “Black and Hispanic borrowers are more likely to be rejected when they apply for a loan and (if approved) are more likely to receive a high-cost mortgage.”
“It was distressing to find no evidence of reduced discrimination in the mortgage market over the last 35 years,” said Quillian. “Persistent racial stereotypes are still very strong and those affect judgments that people make, including people making decisions about giving out loans.”
Mortgage data debated
Most of the data on home lending comes from disclosures required by the Home Mortgage Disclosure Act (HMDA). Lenders must report to the Department of Housing and Urban Development information about the borrower and details of the mortgage. Lenders do not report personal financial information of the borrower, like credit scores and employment history, and so can always fall back on those factors as the reasons for denial.
The Granite State News Collaborative used the HMDA database to analyze the lending patterns of the state’s top 20 mortgage lenders from 2018 to 2020 and found wide variation in denial rates.
CMG Mortgage, Freedom Mortgage, CrossCountry Mortgage and Fairway Independent Mortgage all denied Hispanics at more than twice the rates they deny whites, while Quicken Loans, HarborOne Mortgage and Digital FCU had denial rates that were identical or within a few percentage points of each other. (See chart: “Denial Rates and Reasons”)
The collaborative also constructed its own database for the calendar year 2020, using HMDA data for New Hampshire.
In 2020, TD Bank and Wells Fargo approved an unusually low number of Hispanic applications compared to other lenders of their size. TD Bank only gave two of its 1,414 approved loans to Hispanics. Wells Fargo gave eight of 742. No other lender in the top 20 had fewer than 10 Hispanic borrowers.
St Mary’s Bank approved 34 of 59 applications by Hispanic borrowers, an approval rate of 57 percent, compared to 80 percent for non-Hispanics.
What lenders say
We reached out to lenders with high denial rates for Hispanics and heard back from several (see sidebar). Fairway spokesperson Alyson Austin offered an answer that was similar to what many others said.
RELATED STORY: Banks say HUD data only tells part of the story
HMDA data is “an appropriate first step in this type of inquiry,” she wrote in an email, but added, “additional analysis is needed to determine whether factors unrelated to race explain disparities observed in raw HMDA data.”
“It is important to recognize that the publicly available HMDA data does not account for any credit criteria or other legitimate factors (used) by both lending institutions and government regulators to assess potential fair lending risk. Without this information, it is impossible to draw a meaningful conclusion regarding Fairway’s treatment of similarly situated loan applicants.”
Banking and mortgage industry lobbyists have fought hard over the years to prevent consumer credit data from appearing in HMDA reports, citing fears of hackers gaining access to private financial information.
Reacting to complaints
When presented with the HMDA data showing high denial rates for Hispanics, former New Hampshire Banking Commissioner Gerald H. Little sounded a similar note (who was interviewed for this article before his retirement at the end of 2021), arguing that the numbers may merit further investigation but don’t prove discrimination per se.
“It should be understood in a broader context,” said Little. “I don’t believe it automatically suggests discrimination. It suggests something we ought to take a look at. But I don’t think you can make the jump that we see twice as many denials and therefore there is discrimination based on race.”
And that’s not the kind of investigation that the NH Banking Department can conduct.
“We do not have staff at the department sufficient to allow us to on a continual basis review HMDA data and then initiate an investigation into particular entities,” he said. “In a perfect world, we would, but we don’t have the resources. Our investigations are informed either by what we see during our regular examinations or by consumer complaints, and we have more work than we can handle, based up those two sources.”
The commission gets about 100 consumer credit complaints a year; most are about whether or not a loan payment was properly applied, according to Little. The consumer credit division received 585 complaints from 2017 to 2021, with only one citing discrimination in lending. That complaint was closed as “institution within its rights,” according to Banking Department spokesperson Ian Clark.
When action is taken against a bank for discriminatory lending, it’s more likely to come from a non-governmental consumer watchdog than a federal or state regulatory agency. A case in point is the lawsuit filed on Oct. 7 by the Fair Housing Center of Central Indiana against Old National Bank, after the center revealed that Old National made more than 2,250 mortgage loans in the Indianapolis metropolitan area in 2019 and 2020, but only 37 were to Black borrowers. Blacks comprise 15 percent of the city’s population.
“They were making loans in majority white neighborhoods but not in Black neighborhoods,” said Amy Nelson, executive director of the Fair Housing Center of Central Indiana. “It’s more of a redlining issue than anything else.”
The tried-and-true technique for revealing discriminatory lending is what is known as “testing,” in which an agency like Fair Housing of Central Indiana sends two people with equal qualifications but of different races to apply for a loan, rental or refinance, then monitors the result.
“We did not have any complaints reported to us, but that’s very common in these types of lending investigations,” said Nelson. “It’s very difficult for people to identify that they may have been discriminated against and report it because you are expecting accurate information from a loan officer. If a Black person is told they are unqualified, they have no way of knowing if a similarly situated white person came a few hours later and was told something different. That’s why fair housing groups across the country not only analyze the data on bank branch locations and denial rates, but also do fair housing testing to uncover fair housing discrimination.”
Pool is too small
New Hampshire doesn’t have a Fair Housing Center like the one in Indiana, but NH Legal Assistance has for years operated a Fair Housing Project that has received federal funding for testing.
In 2020, HUD gave NH Legal Assistance a grant of $360,000 to conduct fair housing testing, but the legal aid agency is focused exclusively on discrimination in rentals.
“Under our grant, we are committed to doing testing in rental properties throughout the state,” wrote NHLA spokesperson Sarah Palermo in an email. “We need to conduct 30 sets of tests per year under the grant obligation. As far as I am aware, NHLA has never been involved in testing regarding lending.”
Wellington recalled how the NHLA tried unsuccessfully to launch a testing program aimed at mortgage lending in its 2007-08 grant. “We included in our grant proposal that we would do mortgage testing,” she said. “We got trained but we couldn’t get the program off the ground for a number of reasons.”
The main reason?
“To do mortgage lending testing, you need a big enough pool of people of color to match up with the control group, which is generally white people with matching financial profiles … We just couldn’t get the pool of protected class members. It’s such a small number of people in our state, especially back then.”
–GSNC Data Editor Johnny Bassett contributed to this report
To download any of the data presented in these articles visit our data library www.collaborativenh.org/data-library These articles are being shared by partners in The Granite State News Collaborative as part of our race and equity project. For more information visit collaborativenh.org.
