Unequal lending keeps redlining alive in Philly’s gentrifying neighborhoods

Published in PlanPhilly, February 15 2018

Rachelle Faroul is a 33-year-old woman with a good credit score and a degree from Northwestern University. When she decided to buy home in West Philadelphia, near Malcolm X Park, Faroul, then earning $60,000 a year teaching at Rutgers University, didn’t think to have her partner co-sign the loan. It didn’t seem necessary — until it was.

“I had a fair amount of savings and still had so much trouble just left and right," Faroul said.

Despite her strong credit score, the young professional found herself rejected twice by lenders when trying to purchase a home in the gentrifying neighborhood. Faroul is black. One of the lenders who turned her down, Philadelphia Mortgage Advisors, made 90 percent of its loans to white applicants in 2015 and 2016. The independent broker told Faroul her income was not steady enough.

So she got a new job, at the University of Pennsylvania. But a year later, when Faroul tried for a loan with Santander Bank, new obstacles arose. An unpaid $284 electric bill appeared on her credit report, tanking her score. Santander said it couldn’t move forward. The bank denied 13 percent of white applicants in 2015 and 2016, compared to 37.1 percent of black applicants.

Things changed for Faroul when her partner, Hanako Franz, who is half-white and half-Japanese, agreed to co-sign her loan application. With Franz’s signature on the dotted line, Santander sang an entirely different tune. Faroul's loan officer had “completely stopped answering Rachelle’s phone calls, just ignored all of them,” said Franz. “And then I called, and he answered almost immediately. And is so friendly.”

At the time, Franz was working part-time at a grocery store, earning a biweekly income around $144.65. The couple was approved for the loan in just a few weeks. But the experience still stings Faroul.

“It was humiliating,” she said. “I was made to feel like nothing that I was contributing was of value, like I didn't matter.”

As the Philadelphia housing market booms, white homebuyers and homebuyers of color are not equally able to reap its rewards. White Philadelphians received 10 times as many conventional mortgage loans as black Philadelphians in 2015 and 2016, though they make up similar shares of the population, according to a yearlong analysis of millions of Home Mortgage Disclosure Act records by public radio program "Reveal" from The Center for Investigative Reporting.

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