Eduardo Romero Sanchez thought he had one last chance to save his house. He paid a man $1,800 after he heard a radio ad saying he could modify his mortgage to eliminate soaring monthly payments.
The mortgage rescue never happened. Sanchez lost his four-bedroom Bloomington home to foreclosure in 2011. After nine years as a homeowner, he was a renter once again.
“It was very sad, especially given everything that I lost along the way,” Sanchez said an interview in Spanish. “The only solace I had was knowing that I wasn’t the only person who was taken advantage of.”
Sanchez’s plight reflects how thousands of Latinos and other minorities are faring in Minnesota’s housing market. Despite the economic recovery, 38 percent of minorities owned a home in Minnesota in 2011, compared to 77.5 percent of whites, according to census data analyzed by the Amherst H. Wilder Foundation. Census figures show Minnesota’s gap in homeownership between whites and communities of color is the worst in the 50 states.
State anti-discrimination officials and civil rights advocates say the drop in homeownership among minorities is the consequence of bad lending practices during the housing boom that made them especially vulnerable to foreclosure. Many of those practices have been outlawed, but minority homeownership hasn’t bounced back because many of those affected have also lost jobs or fallen victim to mortgage modification schemes.
University of Minnesota researchers have also singled out racial discrimination. Two years ago they recommended that “financial institutions, local governments and decisionmakers should be held accountable for enforcing anti-discrimination policies in lending and foreclosure practices.”
Several major banks strongly deny that they discriminate against minority borrowers. Teri Charest, a spokeswoman for Minneapolis-based U.S. Bank, said the company judges borrowers solely “and consistently on financial criteria and not on race.”
But Scott Gray, Minneapolis Urban League president, said the problem is “very real.”
“We wonder when this state is going to wake up and say that all of its citizens are part of this community that we call the state of Minnesota,” Gray said.
Highest gap in country
The homeownership disparity in Minnesota has historically been wider than the national average. In 1990, that gap was 35 percent, compared to a national average of 24.5 percent.
For households of color, homeownership in Minnesota peaked in 2008 at 46.5 percent, according to census data. But after the housing market crashed that year, the gap grew at a rapid pace in Minnesota, while the national disparity stayed steady.
Between 2009 and 2011, U.S.-born blacks in Minnesota had a 26 percent homeownership rate, the lowest for at least 20 years. Hispanic homeownership was 43.5 percent.
Craig Helmstetter, senior research manager at the Wilder Foundation, said research by his organization and others has shown that Minnesota’s communities of color were more likely to get a subprime loan, which led to higher foreclosure rates when the housing market crashed. That has now made it more difficult for minorities to recover, he said.
The University of Minnesota’s Institute on Race and Poverty used Home Mortgage Disclosure Act data from 2004 to 2006 to conclude that even higher-income minorities were denied loans at a higher rate than whites with lower incomes. The 2009 study says “the denial rate for blacks with incomes above $157,000 was 25 percent, while it was just 11 percent for whites making less than $39,250.”
“The numbers are astounding,” Gray said.
In 2012, Wells Fargo paid at least $175 million to settle federal allegations that it discriminated against black and Hispanic borrowers. The Twin Cities was not one of the eight metro areas examined by the Justice Department.
Wells Fargo, the largest home mortgage lender in Minnesota, does not “tolerate discrimination against, or unfair treatment of, any consumer,” said bank spokeswoman Peggy Gunn.