TD Bank should increase mortgage lending in Black and brown communities

Philadelphia has always prided itself on being a city of homeowners, and just over half of Philadelphia households own their homes. Owning a home provides stability to their families and neighborhoods and allows Philadelphians to build wealth to pass on to future generations. Unfortunately, our city has a yawning racial homeownership gap: 59% of white households own their own homes, while only 43% of Black households and 48% of Hispanic households do.

Part of this problem stems from banks like TD Bank, which disproportionately make mortgage loans to aspiring white borrowers.

In February 2018, Reveal, a national radio program from the Center for Investigative Reporting, broadcast an investigative report looking at racial disparities in mortgage lending. Reveal focused its reporting on Philadelphia, where the denial rate for Black loan applicants was three times higher than the denial rate for white applicants. Reveal found that TD Bank, with its U.S. headquarters just across the river in Cherry Hill, scored worse than its peers in serving borrowers of color. According to its reporting, “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.”

Unfortunately, four years after the Reveal reporting, TD Bank has done little to improve in lending to aspiring Black and brown homeowners.

With the help of the Reinvestment Fund, Community Legal Services (CLS) recently reviewed data for the last three years of residential mortgage lending by TD Bank and similarly sized mortgage companies. We found that TD Bank stands out among its peers for racial disparities in mortgage lending in Philadelphia and the suburbs. Among mortgage companies with similar volume of loan applications, TD Bank was tied for granting the lowest percentage of its mortgages to Black and Hispanic applicants seeking to buy homes. TD Bank also had the second lowest percentage of its refinance approvals going to Black and Hispanic homeowners.

In fact, during this three-year period, TD Bank was actually less likely to approve a high-income Black applicant for a mortgage than a low-income white applicant.

Why do these disparities persist? For one, TD Bank chooses to make very few loans that are insured through the Federal Housing Administration, a vital source of mortgage funding for borrowers of color. TD Bank also lacks a robust first-time home buyer program compared with other lenders in Pennsylvania. And while TD Bank has 20 branches in Philadelphia, according to an analysis by our colleagues at CLS, only one is in a majority Black census tract and one other is in a majority Latino census tract.

At CLS, we see how lack of access to regular mortgage lending forces our clients to turn to predatory alternative lending and rent-to-own schemes or defer making needed repairs to their aging homes. Others seeking to buy a home become discouraged by the racially biased barriers they face and remain vulnerable to ever-rising rents and eviction.

» READ MORE: The $20 million settlement against a racist mortgage lender should just be the start | Editorial

Instead of exacerbating the racial homeownership gap, TD Bank should play a leading role in the solution by increasing its mortgage lending in Black and brown communities. The Community Reinvestment Act provides federal regulators the opportunity to ensure that financial institutions, like TD Bank, meet the credit needs of the entire community in which they do business, with a focus on low- and moderate-income borrowers.

TD Bank recently announced plans to merge with Tennessee-based First Horizon Bank. Any bank merger should include a meaningful commitment to serve the communities where the bank makes its profits. We urge the regulators to make approval of this merger contingent on a strong community benefits agreement that increases access to mortgage lending and homeownership for Black and brown borrowers and those in underserved Philadelphia neighborhoods.

Rachel Labush and Michael Froehlich are attorneys with Community Legal Services’ Homeownership and Consumer Rights Unit.