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Building Innovation is a collection of stories by 90.5 fm WESA reporters about the Pittsburgh region focusing on efficient government operation, infrastructure and transportation, innovative practices, energy and environment and neighborhoods and community.

Wide Racial Gap Remains For Pittsburgh Mortgage Loan Approvals

Pittsburgh Community Reinvestment Group

Four out of 10 black people in Allegheny County wanting to buy a home are denied a mortgage. That's two times the rate of white applicants, according to data released Monday in the Pittsburgh Community Reinvestment Group’s 21st Annual Mortgage Lending Study.

“The level of African American lending is extremely low compared to all other groups,” said Rachel Rue, researcher with the PCRG.

In 2013 there were more than 12,000 mortgage loans issued in Allegheny County; 408, or 3.4 percent, went to black borrowers, who comprised 13 percent of the county’s population and 5.9 percent of mortgage applicants.

The study indicates that black, Pittsburgh-area borrowers are turning more to independent mortgage companies, non-local banks and credit unions for a combined 65 percent of their mortgages. Overall, borrowers of all races obtain about 42 percent of mortgages from Allegheny County banks.

According to Rue, minority and low-income borrowers who earn one half or less of the region’s median income are not benefiting from the economic recovery as much as everyone else.

“Upper-income borrowers have seen quite a lot of recovery in the amount of mortgage lending, and middle- and moderate-income borrowers have seen a reasonable amount of recovery whereas low-income borrowers are really stuck where they were in 2008 at the end of the recession.”

Credit Pittsburgh Community Reinvestment Group
African American applicants are disproportionately rejected for a mortgage loan due to credit history.

In 2009, the local mortgage market began picking up for white and Asian borrowers but not for black borrowers, she said.

“Finally in 2012 we started seeing a little bit of recovery for African Americans, and so the gap has started narrowing a bit, but it’s still very wide, very concerning.” 

In the study, lenders cited credit history as the most common reason for denying a loan, but for black applicants it was disproportionately high — 58 percent for blacks compared to 38 percent for whites.

Rue credited two basic reasons for a questionable credit history: problems paying off previous loans and credit card bills or no history at all — having never applying for and received a prior loan. 

“They come to the bank and the answer is ‘You don’t really have a credit score or not one that we can rely on,’” she said. “One of the reasons credit history can come up so often is that there’s an absence of a sufficient borrowing record in the past. To borrow money from a bank for a mortgage, you have to have already borrowed money in the past and paid it back.”

So paying for everything in cash isn’t always a good thing, Rue said.

“It turns out if you’re not at least borrowing some money and paying it back regularly, you’re not going to be able to move to the next level of borrowing, which you need to be able to do to buy a house,” she said.

While the gap in mortgage loan approval between whites and minorities has shrunk a bit, Rue said additional steps are needed to really decrease the disparity.

“More jobs, better paying jobs and a great deal of education about credit history, about how to build credit history and how to repair credit history.”