How University Bank is redressing redlining

Stephen Lange Ranzini’s father taught him about the importance of fighting for positive change. Ranzini describes his father, who was first an attorney and later a judge, as a “pioneering civil rights advocate.” During his career, Joseph Ranzini helped to break down legal barriers for Black people, Jewish people, immigrants and Catholics in central New Jersey, where Ranzini grew up. It’s a lesson Ranzini, now president and CEO of $701 million-asset University Bank in Ann Arbor, Mich., has taken to heart in his work as a community banker.

“Over my 33-year community banking career, I have been privileged to utilize my position as CEO to be a strong and consistent advocate to advance women and minorities,” Ranzini says. He has devoted much of his professional and personal time to addressing a wide range of DEI (diversity, equity, and inclusion) issues, and one of his focuses has been on redlining in Ypsilanti, a city outside of Ann Arbor. Redlining is the systematic denial of services, traditionally mortgages, to residents of specific communities based on race or other characteristics.

Earned recognition

Ranzini and University Bank’s work was recently recognized by Crain’s Detroit Business Crain’s 2021 Notable Executives in DEI.

Alma Wheeler Smith, a former Michigan state senator and state representative, sums up why Ranzini won the award: “Stephen was forward-looking, tackling the poverty‑ensuring legacy of redlining in Ypsilanti [Mich.], creating religious-compliant no interest-loan programs for Muslim borrowers and putting women and minorities on the bank’s board before demands for racial and gender equity drove other banks to introduce those changes.”

When Ranzini first moved to Ann Arbor, he met with community leaders to get their take on the area’s unmet banking needs. In one such meeting, John Barfield, a pioneering Ypsilanti businessman who passed away in 2018, shared his experience as the town’s first Black person to get a mortgage, in the early 1960s.

While redlining is illegal today, its legacy is still felt in Ypsilanti and in many communities across the country. For example, the town’s housing stock is largely rentals, continuing a history of a lack of homeownership and multigenerational wealth among Black people.

“The household wealth of [Black people] in Ypsilanti is materially lower than that of whites,” Ranzini says, “because they have not yet had time to catch up, since the intergenerational building of wealth usually occurs via homeownership.”

“Because the banks were not lending to the Black community on the south side of Ypsilanti, home prices were artificially depressed, and a large portion of the citizens of the city could not become homeowners.”

—Stephen Lange Ranzini, University Bank

After holding community meetings and conducting his own research, Ranzini concluded that bank redlining practices in Ypsilanti had held home prices artificially low. To understand the reason why Ypsilanti became economically depressed compared with Ann Arbor, Ranzini points to Barfield’s example.

“Because the banks [had not been] lending to the Black community on the south side of Ypsilanti,” he says, “home prices were artificially depressed, and a large portion of the citizens of the city could not become homeowners because of this overt discrimination.”

Creating a new loan program

Realizing there was a pent-up need for mortgages, University Bank teamed up with National Faith HomeBuyers, formerly known as Washtenaw HomeBuyers, a local nonprofit with a home ownership counseling program led by founder and CEO Dina Harris.

Now that it had a nonprofit partner, University Bank handled the credit side, launching a 3%-down portfolio mortgage program for first-time homebuyers in Ypsilanti. The program was designed to chip away at one of the biggest barriers to mortgages: the traditional 20% down payment.

In so doing, Ranzini says, the bank was potentially risking its shareholder’s funds. To address this concern and to ensure solid banking practices, University Bank created a policy that it would lend to any borrowers regardless of credit score as long as they met three criteria.

First, they had to graduate from the Washtenaw HomeBuyers Program. Second, they had to have perfect credit for the previous 12 months. Third, they needed to be able to show that they had sufficient income to afford the mortgage payments.

Next, Ranzini personally led an aggressive outreach effort to dozens of local Black ministers to find potential homebuyers among their congregations.

“The program was a huge success,” Ranzini says. “We lent over $8 million in Ypsilanti under the program and did not have even a single foreclosure, despite lending to homebuyers with credit scores as low as 460—160 points under the then-traditional cutoff point for underwriting approval.”

Continuing the work

The work of University Bank and National Faith HomeBuyers has achieved positive results. It helped to expand the community bank’s loan customer base, 12% of whom are Black, compared with 8% of the county’s population. The bank also received an award from the FDIC for outstanding community service and community reinvestment.

And National Faith HomeBuyers won an award from the Department of Housing and Urban Development (HUD) for its homeownership counseling program, which has been hailed as a national model.

Most importantly, the program was able to make positive change in the community. “As a result [of our work], other banks saw that lending on the south side of Ypsilanti was profitable, and they piled on,” Ranzini says. “Home prices more than doubled, and hundreds more families were able to achieve the American dream of owning their own homes.”