With the help of a 3-year long Marquette University study, the I-Team uncovered troubling statistics in the way minority homebuyers are treated.
“I have bought 3 homes before and have not been discriminated against because of my last name which doesn’t sound African American, nor do I sound like an African American,” Milwaukee resident Tracy Di Donatella said.
Di Donatella says her name has helped her avoid discrimination, but that’s not the case for every African American.
“It’s something you hear about,” Dr. Andrew Hanson, a Marquette University economics professor said. “You see the news clips and hear about the lawsuits.”
Hanson is the lead author behind a study focused on gathering data on lending discrimination.
“There’s a small segment of the market that definitely treats minorities differently,” Hanson said.
Hanson sent emails to more than 5,000 mortgage loan officers across the country.
The emails were similar in nature and asked for basic information on current mortgage rates and loan options. The only difference in the inquiry was the name of the person sending the inquiry.
"Mortgage loan officers each got an email inquiry from one white sounding name and one African American sounding name and then we looked at the data to see whether they are treated differently,” Hanson said.
The results found black sounding names received fewer responses from loan officers.
For example, inquiries sent using the name “Jake Kreuger” got a response 72-percent of the time when compared to “DeShawn Banks”, who only received a response 62-percent of the time.
Loan officers also sent fewer follow-up emails to inquiries from African American sounding names.
You can read the entire study and findings here.
"Prior to doing the study, what I hoped and what I thought I would find was that there's no discrimination and this was something that happened 50 or 60 years ago,” Hanson said.
People we spoke with in Milwaukee aren’t necessarily surprised by the findings.
"I don't think it's right at all but what can I do,” Milwaukee resident Jermain Edwards said. “Everybody deserves a fair try (opportunity to secure a loan) no matter their race or color."
Discriminatory lending practices during the 2004 to 2008 housing boom resulted in two of the largest cash settlements ever between mortgage lenders and the U.S. Department of Justice.
Countrywide, now associated with Bank of America paid out $335 million, while Wells Fargo settled for $175 million.
“They are doing something that isn’t right or fair,” Milwaukee resident John Banck said.
The I-Team decided to copy Marquette University’s study with local mortgage lenders.
Using one white and one African American sounding name, we emailed the 10 lenders asking about loans.
“Ethan Schmitt,” a name commonly associated with a white male according to birth certificate data, received a response 90-percent of the time.
“Jermaine Booker” only received a response 80-percent of the time.
Wisconsin Mortgage Corporation in Brookfield never replied to “Jermaine’s” inquiry.
However, less than 6 hours after receiving an inquiry from “Ethan”, a compliance manager responded saying she was out of town and one of her loan officers would be in touch.
The very next day, a senior loan officer followed up with "Ethan".
We contacted John Inzeo, the company’s vice president for answers about why they responded to our white subject, but not our African American subject.
Inzeo declined an interview but in an email, he acknowledged inquiries from both subjects were received.
He claims a loan officer was never alerted to contact our African American subject due to a computer system error.
Inzeo goes onto say the company will do additional testing to make sure this doesn’t happen again.
Inzeo’s full email reads:
“I wanted to follow-up with more information on what we found regarding your investigation into our "Customer Care" e-mail portal. As you know, both requests were successfully received into our system. We have confirmed that both e-mails received a system response directing the customers to contact our Loan Officer who was covering these communications. Unfortunately, the direct communication alerting that Loan Officer did not occur in the case of the e-mail you sent under the name Jermaine Booker. The alert was received for the e-mail you sent under the name Ethan Schmitt and our Loan Officer did reply. Had either customer made a direct contact to the Loan Officer referenced in the automated reply ( received by both ), they would have received a direct contact from that Loan Officer. In the case of Ethan Schmitt, he received a direct contact because the alert to the Loan Officer was sent successfully. We further looked into the issue of the alerts sent by our staff member who has been in Mexico for two weeks. Because the alerts were being managed through the use of a cell phone, we suspect the alert related to the Jermaine Booker e-mail was not sent. Given the scope of your test ( two e-mails ) we are doing some additional testing in our system to make sure this doesn't happen again. We are also looking at our process for covering these communications when people are traveling for extended periods of time. Since 1983, Wisconsin Mortgage Corporation has been an Equal Housing Lender.......not because regulations require us to be.........it's the way we do business. We are a leading FHA lender in Wisconsin. We have a longstanding relationship with the WHEDA home purchase program. Our staff members have been active in statewide associations advocating for fair housing in Wisconsin. I'm proud to say that our company has been recognized for our efforts in fair lending tied to actually closing loans in key markets in Southeastern Wisconsin. We are considered a leader in the home purchase market with a special emphasis on the first time buyer. Thank you for sharing your information with us. I always say that what you don't know will usually create unintended issues. Your information will help us insure that our e-mail portal is working correctly. Unfortunately, I'm not available for an on camera interview. I'm happy to follow-up with any questions you might have.”
The 10 lenders the TMJ4 I-Team surveyed are:
- Accunet Mortgage LLC
- A Better Mortgage Co.
- Flagstar
- Wisconsin Mortgage Corporation
- Wells Fargo
- Providence
- Fairway Mortgage Corporation
- QR Lending
- Waterstone Mortgage
If you’ve been denied a loan, it’s important that you’ve taken the following precautions first before claiming you’ve been discriminated against:
-Check your credit report
Consumer experts warn inaccurate information on a credit report can greatly impact a loan decision. Make sure you get these issues resolved before applying for a loan.
-While many loan inquiries are initiated via email in today’s world, some companies may only send you an automatic reply requesting you to contact a local lending officer for more information. Failing to do so may result in no further communication between you and the lending company.
-Ask questions!
If you feel you’ve been quoted a rate that does not appear to be consistent with other mortgage loan options advertised, get a second opinion. It never hurts to shop around before filling out an application.
For more information on mortgage loans, lending discrimination, and what to do if you think you have been the target of lending discrimination, click here.
Hanson's study on lending discrimination will be published in the Journal of Urban Economics in March.
