Al Letson: From the Center for Investigative Reporting and PRX, this is Reveal, I'm Al Letson. It was 50 years ago this April.

Speaker 2: Dr. Martin Luther King, the apostle of non violence in the Civil Rights movement has been shot to death in Memphis, Tennessee.

Al Letson: The country erupted. There was civil unrest from Washington DC to Detroit.

Lyndon Johnson: Of course, all of America is outraged at the assassination of an outstanding negro leader.

Al Letson: That's president Lyndon Johnson. At the time of King's death he was frustrated. Congress was fighting the passage of proposed Civil Rights legislation on housing.

Lyndon Johnson: And indeed this Bill has had a long and stormy trip.

Al Letson: Congress had held up. The fair housing act for two years, and even with King's death, many law makers like this one still wanted to preserve segregation.

Speaker 4: The death of Martin Luther King is a tragic thing, but no legislation should be passed as a memorial to anyone.

Al Letson: King's death finally gave Johnson the leverage he needed to get it passed.

Lyndon Johnson: I do not exaggerate when I say that the proudest moments of my presidency have been times such as this, when I have signed into law the promises of a century.

Al Letson: Housing discrimination was totally legal until the 60s, the Fair Housing Act outlawed it. That law didn't solve the whole problem. While it banned discrimination, banks still weren't making home loans to African Americans. It took nine years for congress to pass the Community Reinvestment Act, which required banks to lend to qualified borrowers in so called blighted neighborhoods. We've been investigating whether decades later the promise of fair housing is being fulfilled. We spent a year going through millions of mortgage records to find out who can get a home loan and who can't. Later in this show, we'll let you know how you can find out what's happening in your neighborhood. We're also going to show you how the Community Reinvestment Act, which was designed to help people of color, is producing some unintended results. Our reporters Aaron Glantz and Emmanuel Martinez, along with producer Katharine Mieszkowski have been traveling the country digging into this issue. Aaron begins in a neighborhood in West Philadelphia.

Aaron: I'm in a part of West Philadelphia that's not far from the University of Pennsylvania. It's what realtors call a neighborhood in transition. There are blocks pockmarked with vacant lots and houses with peeling paint and sagging front porches. This part of West Philly is mostly black. Aunts, cousins, grandparents often live right on the same block. Families have lived here for decades, settling as far back as the 1940s. But there's a lot of remodeling and construction going on. Newcomers are moving in, attracted by the affordable price of housing and proximity to the university. I'm going to tell you about two of these newcomers. One's black, one's white, they each wanted to buy a home in this same neighborhood. Situations like this are playing out all over the country. Let's start with Rachelle Farroul.

Rachelle: I am from Brooklyn, New York, by way of Barbados.

Aaron: Rachelle had graduated from Northwestern and done a stint in the peace corps. She was in her early 30s teaching computer coding at Rutgers University and renting an apartment here in Philly when she decided to buy a house.

Rachelle: My mom and her siblings have been obsessed with home ownership and ingrained this idea in all of us, my brother and I and my three cousins. No matter the cost, buy a home.

Aaron: You can hear how determined Rachelle is, but here's the other thing, she's super organized and prepared. Her mom was a public school teacher who sent her to an elite boarding school. Rachelle went on scholarship and was one of the few African Americans there. She's a high achiever but buying a house turned out to be a lot harder than Rachelle expected. Her first stop was Philadelphia Mortgage Advisors. It's part of a new breed of independent lenders that are not banks but are making an increasing share of the loans in the economic recovery. Rachelle's broker was a woman named Angela Tobin.

Rachelle: Anybody who works in the mortgage arena here in Philadelphia seems to know who she is.

Aaron: At first the broker was enthusiastic. Her emails to Rachelle were full of exclamation points. Angela reviewed Rachelle's credit score, income and savings, and told her everything was on track, but then suddenly Rachelle's application was turned down. Rachelle wasn't on staff at Rutgers, she was teaching there on a contract. Angela told her she hadn't been doing it long enough. She told Rachelle she would have to wait two more years or get a full-time job. Rachelle didn't think that was the real reason. I wanted to know what Angela thought. So I called her up.

Angela Tobin: Hey, great Aaron, how are you?

Aaron: I'm doing well, thank you for taking the time to talk, I appreciate it. First I asked her about the company's performance in Philly. The government keeps track of who gets loans and who doesn't. When we looked at the data, we found that your company, Philadelphia Mortgage Advisors had made like 250, 300 conventional mortgage loans in 2016 and only 10 of them were to African Americans.

Angela Tobin: I don't know where your data is coming from.

Aaron: The data is coming from the government. Your company and every other company is filing information through the home mortgage disclosure act. When we look at the data for your company we see a much larger proportion of borrowers who are white and a much smaller portion of borrowers of color.

Angela Tobin: I can't really speak to that because that is not at all who my particular clients are. If you'd like to speak with someone at my office, I'd be happy to give you the contact information.

Aaron: I told Angela I'd be happy to talk to anyone from the company, but first, I asked her about Rachelle's application. Why had Angela turned her down? She was concerned that it might have something to do with her race, that she was turned away.

Angela Tobin: No, that's not at all accurate.

Aaron: Why do you say that? I love that you hung up on me. After Angela hung up on me, I tried to set up an interview with an executive at the company but no one would talk. Instead, they sent a statement. Philadelphia Mortgage Advisors didn't dispute the numbers they had sent to the government but they said an outside auditing firm said there was quote, no elevated risk of unfair lending practices at the company. Rachelle still wanted to buy a house.

Rachelle: I was like, okay, I have to get a full-time job.

Aaron: Rachelle got a job, Associate Director of the South Asia Center at the University of Pennsylvania. An Ivy League institution. She manages a million dollar grant there. She found a two story house that needed some work. For a loan she went to Santandar Bank. The US outpost of a Spanish bank with original headquarters in Boston.

Rachelle: My experience was so horrible.

Aaron: The process dragged on for months.

Rachelle: I had a fair amount of savings and still had so much trouble just left and right.

Aaron: Her loan officer kept asking for new information or sometimes the same information again. Rachelle answered all their questions.

Rachelle: Didn't matter. None of it mattered.

Aaron: She felt like she was getting the runaround.

Rachelle: I was really sad. I remember there was one day where I just sat on the couch and I was so defeated.

Aaron: The process went on so long that eventually an unpaid electric bill showed up on her credit report. It was for an apartment in New York where Rachelle didn't live anymore. She had sublet ted to another tenant. When Rachelle found out about the bill, she paid it right away. But it still punched her good credit score down 50 points and Santander said that was a deal breaker. Rachelle's story is all too familiar to real estate broker Arlene Wayns Thomas.

Arlene: One thing after another. One thing after another. It's just like pulling layers off an onion.

Aaron: Arlene's the president of a local chapter of African american real estate brokers. She's been helping people buy homes in Philadelphia for 30 years and she says her black clients are treated differently by lenders.

Arlene: Well they may not like what happened between the last time you worked on this particular job to this one. They may see there was a gap. I have seen situations where they've asked people for the children's birth records, they want to know how old they are. The things that happen behind the scenes is what is disturbing.

Aaron: In this neighborhood in West Philly, black people have been having trouble buying homes for generations. It's part of a bigger story of housing discrimination in America called red lining. It dates back to the great depression. The federal government drew lines on maps and shaded some neighborhoods red, warning banks not to make loans there. They said it would be financially hazardous because some areas were, and I quote, "Infiltrated by Negroes. Immigrants too." Other neighborhoods like the one in West Philly where Rachelle wanted to buy were shaded yellow. The government said it was definitely declining because the infiltration of Jewish people had depressed values and that the neighborhood was, quote, "Threatened by negro encroachment." Today, the maps are gone but the lines of disparity are still intact. When we come back, a white couple without a whole lot of cash gets the loan of a lifetime in the same neighborhood where Rachelle was trying to buy a house.

Megan: We could easily get pre approved for a mortgage of up to almost 500 thousand dollars.

Aaron: They were willing to offer you a half a million dollar mortgage even though you had almost nothing to put down and you're a radio producer and a graduate student?

Megan: Correct. After like a five minute phone call.

Al Letson: That's next, on Reveal. From the Center for Investigative Reporting and PRX, this is Reveal, I'm Al Letson. This hour we're talking about home ownership in America. Who can get a mortgage, who can't, and why not. Reveal spent a year looking into this question. Heading over to the data caves to talk to Emmanuel Martinez.

Emmanual: Hey, what's up Al?

Al Letson: Side note, the data cave is just a row of desks that are catty corner mine.

Emmanual: The data cave can be a dark, dark place once you're buried in those numbers.

Al Letson: Don't bury me.

Emmanual: I've been looking at the home mortgage disclosure act data.

Al Letson: This giant government database has information on nearly every home loan application in America. It tells you a lot about who is trying to buy a house.

Emmanual: You have the race and ethnicity of the applicant, how much money they make, how much money they want to take out, then you have the location of where they're looking to get that loan.

Al Letson: So looking here, I see applicant race and I see five five five five five five fives. Who are fives?

Emmanual: Five is white.

Al Letson: Emmanuel went through 31 million mortgage records, covering two years, 2015 and 2016, the most recent data available. He honed in on loans where someone was trying to buy a house with a conventional mortgage.

Emmanual: I did a statistical technique called a logistical regression. We were wondering if someone was going to get denied a mortgage or not.

Al Letson: He looked at nine different factors that banks might use to decide if they want to give someone a mortgage.

Emmanual: Things like income and race and demographics of the neighborhood.

Al Letson: In Philly, where Rachelle lives:

Emmanual: Black applicants there are nearly three times as likely to be denied a conventional home mortgage than white applicants. Even after we control for things like income and how much money they're wanting to take out.

Al Letson: So in Philadelphia, because I'm African american, I'm way more likely to be turned down for a loan, and that's true in many places across America. We found dozens of metro areas where this is happening. In 61 cities, lenders were way more likely to deny conventional mortgage loans to people of color than whites, even after we accounted for how much a person made or how much they wanted to borrow.

Emmanual: I've mapped those metros if you want to take a look.

Al Letson: Yeah, show me.

Emmanual: So here's the map.

Al Letson: African Americans were more likely to be turned down in most of these cities, but we also found the same pattern of denials for Latinos in two dozen metro areas. There were parts of the country where banks were more likely to turn away Asians and Native Americans.

Emmanual: You can see that the problem is everywhere. You have these large metro areas like Orlando, Philadelphia, Jacksonville, Washington, DC where this is a problem. You have smaller places like Santa Fe, New Mexico; Chico, California;

Al Letson: Atlanta, Georgia; St. Louis, Missouri; Tacoma, Washington. In all of these places and dozen more, people of color were significantly more likely to be denied a conventional mortgage to buy a house. If you're wondering what's happening in your neighborhood, you can find out more information right now. All you have to do is text home to 202-873-8325, that's home to 202-873-8325, and here comes the legal lingo, standard texting rates apply. If you want to stop getting the texts, just text stop. Okay, so we've been talking about one woman, Rachelle Farroul, who wanted to by a house in West Philly.

Rachelle: My mom and her siblings have been obsessed with home ownership and ingrained this idea in all of us, my brother and I and my three cousins. No matter the cost, buy a home.

Al Letson: One reason that's so important is because in America, home ownership is the ticket to wealth. But African Americans are being left behind. Their rate of home ownership is the lowest since the 1960s. That's a big reason the median net worth of white families is 15 times as much as a black one. Rachelle wondered whether her race had something to do with why she was having trouble getting the loan. Now, it turns out that the home Rachelle wanted to buy was just one street over from where one of Reveal's producers Laura Starecheski lives. Aaron Glantz stopped by Laura's and got a house tour.

LAura: This is almost done, we've been putting in this patio, we just have to set the last few stones.

Aaron: Laura bought her home last year after it had been gutted, remodeled, and flipped.

LAura: The yard is a work in progress.

Aaron: There's an old oak tree that shades Laura's back yard. It's in the yard of the house Rachelle wanted to buy. Laura and her wife, Megan, a grad student, are both white and their house is almost exactly the same as the one Rachelle wanted.

LAura: This is super standard Philly. Twin, shared front porch. Shared wall with a breezeway between every other house so you get some light.

Aaron: The houses may be similar but the experience Laura and Megan had getting a mortgage was totally different than Rachelle's. Megan said banks were falling all over themselves to get their business.

Megan: We could easily get pre approved for a mortgage up to almost 500 thousand dollars.

Aaron: That was from Wells Fargo. They were willing to offer you a half a million dollar mortgage even though you had almost nothing to put down and you're a radio producer and a graduate student?

Megan: Mm-hmm (affirmative).

LAura: Correct.

Megan: After like a five minute phone call.

Aaron: They ended up going with TD Bank. A big east oast bank. It gave them a loan that was more in line with their budget. So this was 200 thousand dollars?

LAura: 205.

Aaron: 205 and what did you put down?

LAura: 6000?

Aaron: You put 6000 dollars down? So that's like?

LAura: 3%.

Aaron: 3% down. They got a great deal thanks to the community reinvestment act. The 40 year old law requires banks to lend to low income people, but it also requires them to lend to anyone buying in poor neighborhoods. In order to meet its obligations under the law, TD bank offered Laura and Megan great terms.

LAura: We have this special mortgage, you can put a really small amount down, which was good for us because we barely had anything to put down, we put down the minimum.

Aaron: The community reinvestment act was designed to lift up communities, but it was written back in the 70s and it didn't anticipate gentrification. In Philadelphia and other cities across America, upwardly mobile whites are now buying homes in the inner city. This part of Philadelphia is 70% African american, but Reveal found most of the loans here are going to white people like Laura and Megan.

LAura: Okay, so basically you've got two white women with barely any savings to make the lowest possible contribution to get a conventional mortgage and they gave it to us.

Aaron: We found that TD bank where Laura and Megan got their loan, out of all the big banks in Philadelphia, it was the most likely to deny home loans to African Americans. Nearly two thirds of all black applicants over the last five years. I showed Laura a list of everyone who applied for a loan from TD bank. Sure enough, there were many African Americans who made more than 100 thousand dollars a year who were turned down.

LAura: They were denying two thirds of black mortgage applicants.

Aaron: Right. Even when the African american applicants actually make more money.

LAura: Oh, god.

Aaron: I told Laura another thing we learned about TD bank, it has 36 branches in Philly. Do you want to guess how many of them are in majority African american neighborhoods?

LAura: I would guess zero or one.

Aaron: Yeah, zero.

LAura: Zero.

Aaron: They don't have a single branch in a black neighborhood.

Al Letson: Not one branch in a majority black neighborhood but TD bank calls itself America's most convenient bank. Aaron, how do they compare with other banks?

Aaron: All the other big banks in Philly have at least one or two branches that serve the black community.

Al Letson: So what did TD bank have to say for themselves?

Aaron: They wouldn't talk to us, but they sent a statement. It says, TD is fully committed to offering the financial access, resources, and education our customers need to meet their financial goals across all of our communities. Then it goes on to say, quote, "TD's denial rates for all lending products across all races ethnicities and consumer segments shows similar patterns. This demonstrates that TD bank makes credit decisions based on each customer's credit profile, not on factors such as race or ethnicity."

Al Letson: So they claim they don't discriminate.

Aaron: Right. But here's what's not in their statement. When you look at all the large banks in America, TD bank is the most likely to deny a loan application from a black person or a latino.

Al Letson: So Laura and Megan, who are both white, they got a loan really easy, but after a year and a half of trying, Rachelle, who's black, was still struggling to get a loan.

Aaron: Hey there.

Rachelle: Hi Aaron, how are you?

Aaron: Thanks for having me over. When I meet back up with Rachelle, she tells me about her latest attempt to get a mortgage. It was with Santander bank and again she was having trouble.

Rachelle: I, understandably, was really upset because I had been looking for a while and so I was like well what do I do?

Aaron: Rachelle lays all of her documents out on the table, stacked in clearly labeled manila folders.

Rachelle: This is our loan, one of many loan documents.

Aaron: Despite everything she's been through to buy a house, she hasn't lost her cool. She tells me she tried to bring on a cosigner to help get the mortgage approved. Rachelle's mom said she'd do it. Her mom is a retired school teacher who owns property and has a good pension. But the bank said no. So Rachelle's partner, Hanico Franz, suggested they apply together. The two had been dating for less than a year and Hanico didn't even have a full-time job.

Hanico: I worked very part time at this grocery store. That was is.

Aaron: But they decided to go for it because Rachelle had been trying to get a loan for so long, her credit score had taken a beating. When a lender pulls a credit report, the score goes down. The unpaid electric bill hadn't helped either.

Rachelle: By the time we started the application, I was ready to put an offer on the house, they had done so many pulls that my credit score dropped to 635. I love you, I love you so hard, but what was your credit score?

Hanico: Mine was high, it was like 744 or something.

Rachelle: And you have no money.

Hanico: We did this after I was a school teacher for four years, quit my job, moved to japan, was making nine dollars an hour.

Rachelle: Selling french fries.

Hanico: Yeah, selling french fries.

Aaron: Hanico's most recent paycheck was only 144 dollars, but she had something else going for her, she's white adjacent as Rachelle puts it. Her mother is Japanese and her father is white. Hanico identifies as Asian, but she wondered if the loan officer saw her that way.

Hanico: Legally my first name is Mary. Nobody calls me Mary. My email is Hanico, you know. He would call me Mar. And then like towards the end just completely stopped answering Rachelle's phone calls. Just ignored all of them. Then I called and he answered almost immediately and is so friendly.

Aaron: At this point, Rachelle had been trying to buy a house for over a year. A few weeks after Hanico signed on, Rachelle got a mortgage.

Rachelle: Santander allowed me to get a loan because Hanico came on. This process, in a lot of ways for me, was really disempowering, it was humiliating, it was humiliating, and that's where a lot of my bitterness comes from. I was made to feel like nothing that I was contributing was of value, like I didn't matter. You know?

Al Letson: We've been hearing a lot about credit scores, they're supposed to be this neutral way of grading whether a person is a credit risk or not.

Aaron: It's supposed to be an unbiased system. It was actually created to solve the problem of racism. Back in the 80s, loan officers would just turn people down. Just be of the color of their skin. A lot of people in the civil rights community thought, hey, what we need here is an independent number, something that's fair, something that comes out of a machine, but it turned out that the formula that they used is itself discriminatory. For example, if you already have a mortgage payment, every month you make your mortgage payment your score goes up. If you miss a payment, you have all those other positive payments to jack it back up again. If you pay rent, it only reports if you miss it. There's a lot of other things like that. Like payday loans where people of color are targeted for payday loans. If you miss a payment on your payday loan, you get dinged. If you make a payment you don't make any credit from the credit score model.

Al Letson: Then we see that banks aren't lending to African Americans and Hispanics. It seems like inequity is baked into the whole system.

Aaron: Yeah. And then again we found white people with lousy credit scores, where the banks focused on the positive parts of their financial profile. And we found people like Rachelle, people of color, where the bank used the credit score to say no.

Al Letson: Santander, the bank that eventually gave Rachelle a loan after her partner signed on, well, they wouldn't talk to us. Instead, the company sent us a statement. "While we are sympathetic with her situation, we are confident the loan application was managed fairly." The company also said it was, "More likely to grant a loan application from an African american than it's competitors." We reviewed the government data, it shows Santander was nearly three times as likely to deny a black applicant than a white one.

LAura: How are you?

Rachelle: Hey.

Al Letson: Last fall, Laura stopped by Rachelle and Hanico's new home. This particular day was a big one.

Rachelle: Yes, first mortgage payment put in the mail.

Hanico: You put it in the mail a few hours ago.

Rachelle: I put it in the mail today. I had written the cheque, I wrote the cheque on the 31st, I have no idea why it took me so long to put it in the mail. Maybe I was just being a rebel, you know? It's like fuck Santander.

Al Letson: Don't worry, Rachelle's first mortgage cheque got there on time and yes, Rachelle and Laura both got to buy their houses, but, get this, even though Rachelle is borrowing less money, she has to pay hundreds of dollars more every month. Her bank requires her to pay for mortgage insurance, Laura's doesn't. As I mentioned earlier, if you're wondering how this is playing out in your neighborhood, just text home to 202-873-8325, that's home, to 202-873-8325. You'll be able to see the number of loans made near you and the racial breakdown of people who got those loans and those who got turned away. After the break, we go to the banks.

Speaker 13: I would suggest that you go online and see if you can make an appointment.

Al Letson: Or not.

Speaker 13: It's not a branch, not a bank.

Al Letson: That's next on Reveal. From the Center for Investigative Reporting and PRX, this is Reveal. I'm Al Letson. We've been talking about a pattern in cities across America. Banks are turning away people of color when they apply for a home loan. We're looking at Philly because it's one of the biggest cities with this problem. The banks, haven't been interested in discussing this with us. So reporter Aaron Glantz headed over to Philadelphia's downtown, known as Center City, where he's surrounded by banks.

Aaron: I think that right here you can really see how the system is failing in all these different ways from this corner. We have one, two, three, four, five ... Wait, I have to count again. JP Morgan Chase, BB & T, Republic, First Trust, PNC on one block. And then Joseph A Bank, the clothier. Because you couldn't sell a suit on this block unless you were called the bank, there's so many banks here.

Al Letson: Aaron's at Market and 17th street. There's a skyscraper here called Liberty Place and on the 47th floor is the only outpost in Philadelphia of America's largest bank, JP Morgan Chase.

Aaron: Their branch here is part of their private client brand that caters to rich people.

Al Letson: This is the part of chase that helps clients preserve their wealth. That's what their website says. You can also get a mortgage or a line of credit here. Aaron tries to go up to the 47th floor, but he can't get past the security guards.

Speaker 13: I would just suggest you go online and see if you can make an appointment.

Al Letson: Aaron asked the guards if they'd call the branch manager, they said no.

Speaker 13: This is not a branch, this is not a bank.

Aaron: JP Morgan Chase is not a bank.

Speaker 13: This is not a banking.

Al Letson: This location shows up in a federal database of bank branches. Chase told the FDIC that, yes, it was a branch, but when Chase made a list of branches for the regulators who enforced the community reinvestment act, this same building in Philly has disappeared. Aaron stepped outside.

Aaron: JP Morgan Chase on the 47th floor of this skyscraper, in its documents to the federal regulators who are supposed to make sure that it's serving people in the communities where it's located, it's pretending that it's not here.

Al Letson: The community reinvestment act says banks only have to lend in low income communities if they have a branch in a city that takes deposits. Since Chase's only outpost in Philadelphia won't take deposits, that means the bank doesn't have to lend in low income communities here. Chase is exploiting a loophole in the law that allows them to avoid scrutiny of regulators.

Aaron: So what's the result of that lack of scrutiny? We looked at the data.

Al Letson: It showed us that JP Morgan Chase helped 745 buy homes in Philadelphia over five years, but, just 15 of those borrowers were African Americans.

Aaron: So in Philadelphia, the biggest bank in America mostly lends to wealthy white people.

Al Letson: You reached out to JP Morgan Chase but no one would talk to you, right?

Aaron: The company sent a statement. It didn't dispute the fact that Chase is almost exclusively lending to white people in Philly, but it said they're planning on opening new branches there as part of a big national expansion sometime over the next five years. What Chase is doing is just one example of how banks are getting around the intent of the community reinvestment act.

Al Letson: So, Aaron, the banks wouldn't talk to you about this but, c'mon, clearly there's a pattern here. 61 cities nationwide.

Aaron: The banks wouldn't go on tape for this story but I spent a lot of time on the phone with them. I talked to the industry trade groups, the american banker's association and the mortgage bankers association and neither of them, by the way, denied the basic fact that people of color are being turned down for mortgages at a rate far greater than whites. In a statement, the american bankers association said the fact the banks haven't gotten in trouble with the federal government, that means there's no systemic problem here. Both industry groups said we didn't include some very important factors in our analysis.

Al Letson: So what are the things that it didn't include?

Aaron: We didn't include credit scores because we don't have them. The reason why is the banks are keeping that information secret.

Al Letson: They didn't want to give you credit scores?

Aaron: It's not that they didn't want to give it to us, they've been fighting giving it to the government. Congress passed a law in 2011 that said this information is really important. The global economy crashed because of bad lending and there was a Dodd Frank bank reform act, right? One of the things that it did is it said banks, mortgage brokers, you need to give us this other important information so that we can monitor you. That was seven years ago.

Al Letson: And they still haven't done it?

Aaron: They've been fighting it every step of the way.

Al Letson: The whole reason we got into the mortgage crisis is because people were getting houses that they couldn't afford and didn't have the credit for, right?

Aaron: Right. They corrected for that. Remember, think back, 2008, 2009, nobody can get a loan. Credit has evaporated for everyone. Now here we are, almost a decade later, credit is back, but only for some people.

Al Letson: And how do they justify that?

Aaron: The banks are saying that if we had this information, that some of the disparities we're seeing would simply melt away. That once you have this key credit score data that you would understand why it is that African Americans or Latinos would be denied at far greater rates than whites.

Al Letson: So they're basically saying that blacks and Latinos just naturally have bad credit? That's what it sounds like you're saying.

Aaron: I think that's one of the main reasons why nobody would give an on the record taped interview for this story. I spend months trying to get any of the banks that are featured in this show to sit down and talk to me on tape. I think fundamentally the reason that they didn't want to do it is be they would have exactly the same exchange with me that you and I are having right now.

Al Letson: Okay, so, if the banks wouldn't talk to you, what about the people over the banks, the government regulators?

Aaron: Well the more mortgage data we analyzed was from 2015 and 2016, during the Obama administration. So I met with the nation's top bank regulator when Obama was in charge. He's in Boston. Tom Curry's in the private sector now. Instead of regulating banks, he represents them. He works for the Nutter law firm, their offices overlook Boston Harbor. The firm is on the 5th floor. Curry's a soft spoken guy, a 61 year old man in a suit who spend his whole career in government, the last five years as the nation's top bank regulator, the comptroller of the currency.

Tom Curry: Too young to retire and too poor to retire after 35 years in government.

Aaron: I really only had one question for Curry, how was it that during those five years inspecting banks that he found 99% of them to be doing a satisfactory or outstanding job? So almost every bank in America is doing a good job?

Tom Curry: In a way I think you have to look at each individual bank and their individual record to see how well they're serving their communities.

Aaron: We told him about TD bank giving a loan to our producer Laura Starecheski, a young white woman without much savings and a lot of student loan debt. At the same time they denied the majority of home loan applications from African Americans. Curry said he wouldn't talk about any particular bank, but he made this more general point about the community reinvestment act.

Tom Curry: It's consistent with safe and sound lending practices.

Aaron: What Curry meant was, even though banks are required to lend in low income neighborhoods and to poor and working class people, that doesn't mean they have to give a loan to any particular person, especially if they're unqualified. I told Curry about our analysis of 31 million mortgage records and that we found 61 cities across the country where people of color are more likely to be denied home loans, even after accounting for other factors like how much money they earn or the amount they want to borrow.

When you see these numbers after doing the analysis in Mobile, Alabama; Osceola, Florida; Greenville, North Carolina; Vallejo, California; Columbia, South Carolina; all of these cities where our statistical show the reason you'd be denied for a loan is the color of your skin and yet under your tenure, under the previous head of the agency, 99% satisfactory. How can everyone be getting the satisfactory rating?

Tom Curry: I can't answer that.

Aaron: We found the same thing in Memphis, in Wichita, in Little Rock, if all of these banks are getting satisfactory community reinvestment act assessments, how come in all of these places people are being denied?

Tom Curry: I think the results from your studies are unacceptable from the standpoint of what we want as a nation and to make sure that everyone shares in economic prosperity.

Aaron: Curry may say that today, but when he was in office, he gave a passing grade to 99% of banks. After Curry left, President Trump tapped Joseph Otting to be his comptroller of the currency. Otting is the first former bank executive to hold the position in half a century. He was president and CEO of One West, which after the housing crash was nicknamed the foreclosure machine. He left with a 12 million dollar severance package and then became CEO of a golf club in Vegas. At his confirmation hearing last July, Senator Sherrod Brown of Ohio grilling Otting about his record at the bank.

Senator Brown: You permitted your bank to break the rules while in the process making life harder for homeowners. How do we trust that you won't allow banks to skirt the rules and harm their customers as their regulator?

Joseph Otting: My viewpoint is that if you look at the actual facts there's a false narrative out there about the One West Bank servicing numbers. I think you would walk away feeling very good about our operations.

Senator Brown: False narrative to you, not to those that lost their homes.

Aaron: We requested an interview with Joseph Otting, but he wouldn't talk to us. I asked his predecessor Tom Curry why he gave a passing grade to Otting's bank, One West. They had such a poor track record of lending to blacks and Latinos. During the five years that he was the head of this bank, they made exactly three loans to African Americans to help them buy homes and just 11 to Latinos. Your office gave this bank a satisfactory rating. It's one of the biggest banks in southern California.

Tom Curry: I'm not going to get into specific banks regardless of who was the CEO.

Al Letson: So this is where we are. The top bank regulator in this country ran a bank that pretty much only lent to white people. That was made possible in part because the person who was in that same chair before gave him, and nearly everyone else, a passing grade on the community reinvestment act. So this landmark Civil Rights law from 40 years ago that was supposed to deal with the historic legacy of redlining is useless for a lot of people it was supposed to help. In fact, the cruel twist of the law is driving the ferocious pace of gentrification in cities around the country. Aaron went to another neighborhood in Philly where you see the changes happening.

Aaron: It's Point Breeze, just south of downtown Philly. It's filled with vacant lots, boarded up buildings, a bunch of liquor stores, there's no supermarket. But there's construction all over the place. On one corner you can see as a gap [inaudible 00:38:57] place, a café that serves espresso and PB and J, there's even a new yoga studio.

Kelly Kim: [inaudible 00:39:05] or you can begin to press on one elbow and lift yourself up with [inaudible 00:39:10]. Find a nice comfortable spot on your back, allowing your legs to go long.

Aaron: The yoga instructor, Kelly Kim, is white. From rural southern Illinois. She moved here a few years ago with her husband, Hagana Kim, who's Korean American. They're both lawyers. The yoga studio is their side business.

Hagana Kim: It's like a fun way to spend our time. It's really more of a hobby than anything else. Honestly it pays for pizza a couple of times a week. It's fun. We've met a lot of our neighbors.

Aaron: The community reinvestment act is why the Kims got a loan with almost no money down, a lot interest rate, and almost no fees to buy their first house.

Hagana Kim: Then we realized you don't even have to be a first time homeowner.

Aaron: Then they used the same law to buy another house that they rent out, and then another, and another, and another. Five homes altogether. Now they're landlords in Point Breeze. The mastermind of this whole neighborhood transformation is developer Ori Feibush.

Ori: It's incredible to see just in five years how much this little pocket has changed.

Aaron: Back in the 1930s, this was one of the neighborhoods that the federal government drew lines around on maps and shaded red, declaring it hazardous for lenders. Today, it's the type of place where banks are supposed to lend under the community reinvestment act.

Ori: Every major lending institution is lending in this neighborhood. There's a host of programs available from every major lending institution that provides first time buyers in this neighborhood with cheaper credit and cheaper money than you would be able to get elsewhere. It is arguably easier to get financing where we sit today than just a few blocks to our north in a more affluent community.

Aaron: At least it is for Ori, a wealthy white developer. In this neighborhood his crews are demolishing old row houses and putting up big single family homes and townhouse complexes.

Ori: I honest to god don't know the exact number but we have participated in the development of several hundred homes and four or five hundred apartments at this point.

Aaron: I walked around the neighborhood with Ori, looking at his development projects, they're easy to spot. Florescent lime green is his color. You'll see it in his officers, on his properties, even his house. So what is up with the lime green?

Ori: Taking the most obnoxious color that glows in the dark was helpful to standing out as a new business owner. It's not my favorite color.

Aaron: He loves in the neighborhood too.

Ori: This is my home.

Aaron: So is this all yours or does this have an apartment?

Ori: It's one home.

Aaron: So did you build this place?

Ori: I did, yeah.

Aaron: When I told Ori that we found banks are favoring white borrowers over people of color, he found it hard to believe that banks would do anything that costs them business.

Ori: It doesn't reconcile with what I see as common sense and it would be obviously heartbreaking to hear that.

Aaron: Ori walks me over to a big townhouse project currently under construction, a whole city block. It's financed by the only bank with a branch in the neighborhood.

Ori: So this lot immediately to our right where 46 homes are gonna go is being financed by First Trust. They're going to finance the construction financing over the next couple of years here.

Aaron: First Trust Savings Bank is a local company that's been in the neighborhood since 1934. They're financing this new development but not doing much to help long time residents here. Adrian Stokes is a retired bill collector who works part time as a home health aid.

Adrian Stokes: C'mon Boots, come on Boots. Thank you.

Aaron: She lives here with her pit bull Boots. She loves Boots. He has is own Facebook page. She lives a few blocks from Ori in a small brick house with aluminum siding on the top floor. Concrete stoop. The metal gate in front is closed with a bungee cord. She brings me inside and shows me how much work the house needs. The windows are cracked, they let it cold air in the winter and water when it rains.

Adrian Stokes: I just want to replace all this because like I said this is all the windows. These windows are really off track.

Aaron: The kitchen window's crack is so big that to hide it, she's build a wall of pirouette cookie boxes in front of it. Downstairs in the basement the sump pump backs up when it rains. The circuit breaker is hanging off the wall.

Adrian Stokes: There you go. Yuck. All these wires drive me crazy and all these wires is like, oh my god, I don't know what's going on. I'm just scared.

Aaron: Adrian went to First Trust to get a home equity loan. Seemed like the natural thing to do. She was current on her mortgage and the balance was low, plus, she had about 200 thousand dollars in equity because her house is now worth more.

Adrian Stokes: The bottom line, I have money and I just wanted the chance to fix up my house.

Aaron: She asked for 30 thousand dollars, the bank turned her down.

Adrian Stokes: I just wanted a home equity loan to fix up my house and I couldn't believe they denied me.

Aaron: First Trust helped more than 500 people in Philly buy homes with conventional mortgages in the last five years. Just 11 of them went to African Americans. When I visited, the branch manager didn't want to talk. And like every other bank that I approached for this story, First Trust wouldn't give an interview. They wouldn't even send a statement. Two doors down from Adrian's place, there's a big hole in the ground. The foundation's been laid and the building is just starting to go up. Adrian says a black family lived here for three decades but the house was gone in a matter of days. A laminated permit on the chain link fence says Ori Feibush is building a new three story house here, with a roof deck.

Adrian Stokes: I feel like who are they just to come here and do whatever they want to do. It's not fair to us because we've been here way before they did.

Aaron: Adrian isn't looking to move up to a brand new house with a roof deck. Like a lot of her neighbors, she's just trying to maintain her home and if the banks won't help out, Philly real estate broker Arlene Wayns Thomas says, a broken sump pump can be the start of a downward spiral.

Arlene: Now it's a sewer line problem. Goes out into the street and the city's going to tax or fine or lien because I had to repay, and I don't have the money to do that, what happens? I have to give that house up. Here comes the gentrification.

Aaron: And that's how even long time homeowners are forced out.

Al Letson: Earlier in the hour we met Rachelle Farroul, an African american women who could only buy a woman who could only buy a house after her partner signed on. Her bank, Santander is one of the only banks in America that's been downgraded under the community reinvestment act. Satisfactory to needs to improve. Now, Santander has made a promise. The bank says it will make billions of dollars of home loans to low and moderate income families across the northeast, lend to small businesses in hard hit communities, and open branches in low income neighborhoods and communities of color. When we told Rachelle about Santander's promises, she wasn't impressed. She says that if something big doesn't change, the city, in that she's just managed to buy a home, will become even more racially divided.

Rachelle: I suspect that in 10 years, maybe less, I'll be the only black person living on this block. That's the impact. People who own homes, black people who own homes, will lose them to foreclosure and then black people who want to buy homes will only ever be able to rent.

Al Letson: As we've said throughout this hour, lending disparities aren't unique to Philadelphia, they're happening across the country. We've made it really easy to find out what's happening with lending near you. Just text home to 202-873-8325. That's home, to 202-873-8325. You can also visit our website, revealnews.org to find out which banks lent to people of color and which didn't. In a minute, we're going to tell you about next week's show. We head to Chicago and see how the neighborhoods are changing there, in part because the city's closing of lots of public schools. But first, a whole team of people helped make today's show possible. Katharine Mieszkowski was our lead producer with help from Laura Starecheski. Aaron Glantz and Emmanuel Martinez reported the story. It was edited by Deborah George. Amy Pyle, our editor in chief, oversaw our entire red lining project and edited the stories that you can read on our website. Anne Hoffman and Richard Deleon reported from Philadelphia. Eric Sagara, Sinduja Rangarajan, Michael Corey, and Jennifer Lafleur helped with the data, as well as Angel Constance from the Associated Press.

Special thanks to Animal Media Group in Pittsburgh and to Solomon Jones in Philadelphia. WHYY provided production support. Our production manager is Mwende Hinojosa. Our sound design team is the dynamic duo, J Breezy, aka Jim Briggs, and Fernando, my man yo, Arula. They had help this week from Catherine Ramando and Cat Shutnik. Our acting CEO is Christa Scharfenberg. Our executive producer is Kevin Sullivan. Our theme music is by Camardo, Lightning. Be sure to check out next week's show, it takes us to Chicago where the city shut down 50 schools in 2013. Since then, people lie Irene Robinson have fought the decision.

Speaker 21: We need our neighborhood schools. It's important. Neighborhood schools are the heart of that community.

Al Letson: When schools shut down, Irene says, people leave neighborhoods like hers Bronzeville, a long time landing place for African Americans in the city.

Speaker 21: Our people, our grandparents, when they left down south, they came to Bronzeville. They built here.