FOX13 Investigates modern day redlining

MEMPHIS, Tenn. — It’s called modern-day redlining, discriminatory practices against a potential homebuyer, not based on their income or credit history, but their race.

Even when applicants do qualify for a mortgage, often the so-called American Dream is always out of reach.

FOX13 learned that the gap in mortgage rates between Black and white applicants is shocking.

In fact, Black applicants are denied a mortgage at a rate 84% higher than white applicants.

RELATED: FOX13 uncovers undervalued homes in Black neighborhoods

It means homeownership is simply out of reach for many.

For many Black applicants, the end game is to actually own a home.

But, it’s the process of having good credit, high scores, less debt and down payments that closes the door for some.

“It was stressful, very stressful,” said applicant Desiree Washington.

“The whole process had got real stressful and I wanted it to be over with,” said applicant Jeffery Hampton.

Washington and Hampton are two examples of Black applicants with good jobs and decent credit. Washington said between having a good job, a credit score of high 500′s, providing all of the paperwork, clearing up her credit and dipping into her 401-k for the down payment, the process was still grueling.

“The underwriting process of home buying has to be the most stressful part because they pick apart your entire life. They dig into every aspect of your home like everything,” said Washington.

Hampton had been living in an apartment and almost walked away from the deal. His credit score was almost 600, but it took nine months for him to get a mortgage.

“I didn’t think I would be turned down so many times and I thought I had pretty good credit and come to find out I was being lied to on certain things,” said Hampton.

Again, he has decent credit, never filed for bankruptcy, and had a substantial down payment.

According to the Home Mortgage Disclosure Act, almost 20% of Black applicants are denied a mortgage. It’s the highest amongst all races. Currently, Black homeownership is up to 44% from the recent low of 40%, but the highest it’s ever gotten is 49.7% and that was in 2004.

The report shows that most Black applicants are denied because they have poor credit or too much debt.

“When they look at us, and first thing they say is they raise the bar and then they say ‘Well, he can’t get this because of that,’ but the same person working the same job of a different color can get that,” said Hampton.

FOX13 sat down with real estate broker Travis Patterson. He’s had clients with OK credit and many with high scores, yet they were still denied.

“In 15 years, how often do you see someone there might be some discrimination or there might be some redlining? How often do you see that? All the time, every year,” said Patterson.

He said the denial rate for his Black clients is at least 3-to-1, if not higher.

For these clients, he said, the problem often includes income disparities, credit struggles and loans from larger banks.

“Their guidelines are totally different from a local lender or broker. I see people with great credit, great income and they don’t meet the retail banks guidelines whatever that means and they get a denial,” said Patterson.

According to HMDA, in 2020 Wells Fargo approved fewer than half of Black homeowner’s refinancing applications.

This is the disparity.

*Wells Fargo approved 72% of white applicants compared to 47% of Black applicants.

“When someone applies for a mortgage the system may approve them, but it may be stuff on a background check or title search that may come up that may not show up on a credit report which causes the client to get denied,” said Patterson.

He admits many clients are not clear about the impact of income, student loans, car notes, credit card debt, payday loans, and child support, even not understanding closing costs and how much you’re actually paying per month.

“Taxes, insurance and mortgage insurance; So the consumer will look at that and say ‘I can afford a $1,000 a month,’ but you get to a lender and its $1,400 a month,” said Patterson.

He works directly with local lenders to help his clients who are often approved immediately.

“Local lenders have a bunch of programs that they have to use and get rid of a lot of money. So, they can produce more mortgages to get more people into houses,” Patterson said.

Patterson said everyone who wants a home should have the chance to determine the key to qualifying for a mortgage based solely on their credit history, not because of their race.

“I deserve a home. I deserve a nice home. I deserve that just like anybody else. Don’t base it on the color of my skin on why you didn’t do it,” said Hampton.

There are currently several resources to help applicants purchase a home.

There are FHA, V-A, Fannie Mae, and Freddie Mac loans.

You may also consider utilizing your 401-k or creating a savings app to help with the down payment and closing cost.