TARP-Supported Banks Reduced Lending in Chicago, New Data Show

A report released by a multi-state collaboration of regional research, policy and advocacy organizations documents the dramatic decrease in low-cost home loans made between 2006 and 2008, and highlights that communities of color were hardest hit by the drop-off in lending.
 
Read the report
 
The report, Paying More for the American Dream IV, examines the mortgage lending patterns of banks, including the nation’s four largest financial institutions, in seven metropolitan areas in the United States: Boston, Charlotte, Chicago, Cleveland, Los Angeles, New York City, and Rochester, NY.
 

Key findings include:
• Prime mortgage lending in communities of color declined more than twice as much as it did in predominantly white communities. While prime lending decreased between 2006 and 2008 in all seven metropolitan areas, the decline in lending was much greater in neighborhoods where people of color comprised 80% or more of the residents. Neighborhoods of color experienced a 60.3% decrease in lending, compared to a 28.4% decrease in lending in white neighborhoods, where people of color comprised less than 10% of the residents.
o In Chicago, the decline in prime lending in neighborhoods of color was 2.6 times greater than the decline in predominantly white areas, with a 53.7 percent decline in communities of color compared to 20.3 percent decline in white communities.
 
• The drop in prime lending for neighborhoods of color was even steeper for refinance loans that allow borrowers to take advantage of lower interest rates or access home equity. Such lending declined by 66.4% in neighborhoods of color, but declined by a mere 13.9% in white neighborhoods.
o In Chicago, prime refinance lending actually increased in predominantly white communities while prime refinance lending in communities of color declined by 49.1 percent.
 
• Between 2006 and 2008 the share of prime refinance loans made in communities of color dropped 35% whereas the share of these loans made in predominantly white communities increased 11%.
o In Chicago in 2006, neighborhoods of color received 10.5 percent of the region’s prime refinance loans. By 2008, the number of regional prime refinance loans going to communities of color declined by nearly 46 percent to 5.7 percent.
 
• The nation’s four largest banks—Bank of America, Citibank, JPMorgan Chase and Wells Fargo—demonstrated similar lending patterns, targeting white communities for new refinance loans while pulling out of neighborhoods of color. Prime refinance lending by these four banks in white communities increased by 32.2% between 2006 and 2008, but decreased in neighborhoods of color by 33.1%.
o In Chicago, the top four banks increased their refinance lending to white communities by 62 percent between 2006 and 2008, but saw their refinance lending to communities of color decline by 24.1 percent over the same period.