NYS probe finds racial gap in mortgage lending in Buffalo

Feb 4, 2021

An investigation by New York state into mortgage lenders in the city of Buffalo found that those companies favored white applicants over those seeking to live in neighborhoods populated mostly by people of color, according to a report on the probe released Thursday.

Credit File/NYS Div. of Housing and Community Renewal

The practice, called ‘redlining,’ has been illegal for decades, but the investigation found it’s not uncommon in the city of Buffalo, where white homeowners outpace those of color.

Loans made to minorities in the Buffalo MSA comprise only 9.74% of the total loans made in Buffalo - less than half of what would be expected given that minorities make up roughly 20% of the MSA’s population
NYS Div. of Financial Services

The state Department of Financial Services, the state’s banking and insurance regulatory agency, found the practice was particularly egregious among non-depository lenders, which are lenders that don’t offer full banking services, so they’re not considered to be banks.

Linda Lacewell, superintendent of the agency, said the finds of the report were “particularly troubling,” but that they could provide an avenue for legislative action.

“Homeownership is a critical path to building wealth and economic stability, and the data is clear - families of color, particularly African Americans, do not have equal access to mortgage lending in Buffalo compared to white households,” Lacewell said.

According to the agency, only 9.74% of loans made in the Buffalo region were offered to people of color, who make up about 20% of the metro area’s population.

The trend was worse for non-depository institutions. Those companies only made 3.7% of their mortgages in majority-minority neighborhoods, whereas depository companies made 5.05% of their mortgages in those communities. Either way, that’s not proportional to the population.

Credit NYS Division of Financial Services

The agency recommended in the report that the state Legislature amend something called the Community Reinvestment Act to apply to non-depository lenders. The law, which currently only applies to full-on banks, requires institutions to clearly define their entire service area.

The state is also asking the federal government to look into federally-regulated financial institutions to detect fair lending violations in Buffalo. Some financial institutions are licensed by the state, while others are licensed by the federal government.

DFS is also referring the report to the state Department of State to investigate real estate agents that non-depository lenders relied on for business in Buffalo. That way, the state can see how they fit into the disparity.

Gov. Andrew Cuomo has proposed legislation, this year, to curb redlining in communities of color by offering more assistance to mortgage applicants in those neighborhoods, as well as state-sanctioned loans.

 

NOTE: "Can Buffalo overcome its racial equities? The answer isn't black and white"  by WBFO's Marian Hetherly is cited in the state's report twice.

Albany reporter Dan Clark is the producer and host of New York Now on WNED PBS Sundays at 9:30 a.m. and a regular contributor to WBFO.org.