Racial Penalties Cost Baltimore’s Black Borrowers Millions of Dollars

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Having the national spotlight on Baltimore isn’t always comfortable. But on balance, I think it’s a good thing when some of the structural reasons for Baltimore’s troubles are given greater scrutiny.

Consider, for example, this recent op-ed from Sunday’s New York Times, which highlights the racial discrimination that Baltimore’s black borrowers faced when applying for mortgages in recent years. A group of sociologists analyzed thousands of Baltimore mortgage applications from 2000 to 2008, controlling for factors such as credit score, income, and down payment. They found that black borrowers, especially those who lived in predominantly black neighborhoods, were consistently charged higher rates than their white counterparts in the same situations:

Over the life of a 30-year loan, the researchers say, these racial disparities would cost the average black borrower an extra $14,904 — and $15,948 for the average black borrower living in a black neighborhood — as compared with white borrowers. That money might otherwise have been put into savings, invested in children’s education, or used to improve health or living standards. The racial penalty was highest for black borrowers earning over $50,000.

Spread that kind of racial financial penalty over a whole city, and you start to get a better sense of some of the serious, on-going, underlying problems facing Baltimore (and similar cities). Let’s hope that this new attention helps us get closer to some solutions.

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