The Negro in Chicago: A Study of Race Relations and a Race Riot

by Chicago Commission on Race Relations

III. REAL ESTATE LOANS TO NEGROES

The most formidable stumbling-block in the way of home owning by Negroes is the unsalability of their mortgages. Except in a limited field these loans have no market. The Negro demand for home property has become so large in recent years that the search for it has extended beyond the fringes of the main existing districts on the South, West, and North sides into the outlying territory adjoining Negro settlements in Blue Island, Woodlawn, Morgan Park, and Robbins. How the Negro is to be financed in his effort to improve his citizenship and home life through home ownership thus becomes a matter of great concern.

The Commission sought to learn from banks, trust companies, brokerage firms, and similar institutions their experience with Negro clients and property and their purpose and plans as to future dealings. To thirty such institutions questionnaires were sent, and twenty-three gave careful replies.

Only a few real estate firms that have a large number of Negro clients have funds available for such loans. These meet but a small part of the demand. The three banks that have large Negro deposits, the Lincoln State, the Franklin State, and Jesse Binga's, make such loans when deemed desirable, but they seem not a large factor in relieving the loan situation. Many of the banks that are depositories for Negroes' funds do not make loans to them, giving as their reason that they do not lend on the class of property purchased by Negroes. Some of them have no real estate department. Only three of the downtown investment bankers make no restrictions regarding Negro borrowers that are not common to all; they have dealt with Negro clients for many years and have found them entirely satisfactory. Possibly one reason for this is that they educate their buyers of mortgages concerning the value of these loans; and thus have succeeded, they say, in overcoming many objections based upon race prejudice.

Most large real estate firms and loan companies decline to make loans on property owned or occupied by Negroes. With some of them this is a blanket provision that covers generally property in changing or depreciated districts. Difficulty of disposing of such mortgages is one of the commonest reasons given for refusing to handle them.

Even among the agencies that handle such loans opinion is not unanimous on fundamental points involved. The Commission asked several brokers representing large interests this question: "Does your experience indicate that loans up to 50 per cent of the valuation on property in the residence districts from Twenty-sixth to Sixtieth streets and from State Street to the lake have a safe-and-sound investment value?" Among those favorable to Negroes the answer of Yondorf & Company, a downtown firm, is perhaps typical: It is necessary to consider each house separately, as conditions vary widely; consideration must be given to future uses of the property, the present condition of the improvements, and especially the stability of the person asking for the loan. As a general rule, loans on old residence property are not as good as those on houses in new districts; on an old house about $1,000 would be loaned on a market value of $5,000, whereas in new districts the contractor can borrow up to two-thirds of the cost of the house; no conscious discrimination is made in the nature of higher rates because a borrower happens to be a Negro; careful consideration is given to the margin of safety, and safeguards are arranged in the way provided for payments.

Lionel Bell, another downtown loan broker, regarded this general type of mortgages on old residence property as fully secured, and does not hesitate to recommend mortgages in the district mentioned.

John A. Schmidt, who handles a large number of loans on Negro property in that district, considers them of high value, though the risks are both physical and moral; it is essential to know both the client and the property; the amount of the loan asked on Negro property usually is not high as compared with its value. No distinction is made as to the color of the borrower, the condition and value of the property being the only basis for the loan; loans to Negroes are less in amount than to whites, though clients thus far accepted are commonly found satisfactory; the period of payment is about the same, varying between three and five years, according to the amount paid monthly, the kind of property involved, and so on. The usual range of amounts requested was one-third to one-half of the value of the property.

R. M. O'Brien & Company, an active South Side real estate firm which also deals largely in Negro mortgages, found that the average amount loaned to Negroes was smaller, and that it is a smaller percentage of the value of the property than in the case of loans to whites, and that the average period for loans to Negroes was three years.

Mead & Coe, another real estate firm, found that the Negroes usually are allowed $1,000 to the white man's $1,500; that only 35 per cent of the value of the property is loaned to the Negro, whereas 50 per cent is granted to whites. Maximum time of loan was five years for the white and three years for the Negro.