By Ashley Gross
May 13, 2010
A new report shows that banks have tightened lending in Chicago’s minority communities a lot more than in mostly white communities.
From 2006 to 2008, banks shut the spigot of mortgage dollars in predominantly minority neighborhoods. Loans for refinancing in particular dried up. Low-cost, conventional refinance loans dropped 49 percent in minority communities in Chicago. They rose about 10 percent in mostly white neighborhoods. The data come from a report co-authored by Chicago’s Woodstock Institute. Geoff Smith of Woodstock says it’s like the old days of redlining.
SMITH: There was no access to prime credit in African-American communities and the subprime industry really grew to fill that vacuum. We see that same kind of pattern happening again.
Smith says it’s difficult to know the reasons why banks have reduced lending in certain neighborhoods. He says one reason may be that banks are wary of lending on homes in areas where foreclosures are dragging down prices.