Greg and Bernadette Johnson started looking in March of 1994. The two had some scratches and dings on their credit records but had been working diligently for some time to pay off their bills. Greg had just changed jobs after working at one company for years. When Greg got back the money he had put into the company's profit-sharing plan, the Johnsons knew what they wanted to use it for: the down payment on a home.

Neither had ever owned a home, and for years they had thought homeownership was out of reach--an impression the Johnsons' initial foray into homebuying reinforced.

"The problems that we ran into had to do with the area," Bernadette says. "I call it the East Valley. Other people still call it South Phoenix."

Actually, the house the couple wanted to buy was in southeast Phoenix, near Tempe Diablo Stadium. Though the clean, quiet, middle-class neighborhood is hardly what some people think of when they hear the words "South Phoenix," the couple still found it difficult to get anyone even to talk to them about buying a house.

"You know how you can tell if somebody's really interested in your deal, the enthusiasm they show? It was like they knew in the back of their minds that we weren't going to get financed, but they wouldn't tell us up front," she says.

A few lenders, including First Interstate Bank, wrung their hands and refused to give the Johnsons a loan, despite the couple's good work history and combined income of more than $40,000. Then the two started looking at mortgage companies. One, Countrywide Funding Corporation, had taken on their case and been giving them "conditional approvals"--in effect, telling them not to worry, that they were approved as long as this or that formality was taken care of. Representatives of both First Interstate and Countrywide said they would not comment on individual applications.

A week before the couple was supposed to close on the house (and after the Johnsons had told their current landlord they would be moving out), Countrywide told them it would not finance the purchase, after all.

"You're already on pins and needles because you're trying to get a house," Bernadette says, "and they're doing this."

About that time, the Johnsons heard about Whitni Smith at Thunderbird Bank. Though a small player in the Phoenix mortgage market, Thunderbird had a solid reputation among area realtors for working with lower-income borrowers to get homes financed.

What mighty First Interstate Bank and a host of other lenders couldn't do in six months, Thunderbird Bank did--in four days.

The Johnsons ended up getting their house, but their happy ending is hardly typical for African Americans in Phoenix. More commonly, prospective Valley homebuyers who happen to be members of minority or low-income groups are repeatedly turned down for loans--until they give up the quest for homeownership.

Government records show that Phoenix financial institutions continue to rank in the bottom third of the country's 20 largest metropolitan areas in lending to minorities and low-income individuals. In fact, a national watchdog group has given almost two dozen Valley institutions "D" or "F" grades in regard to minority and low-income lending.

A New Times survey of mortgage-loan data from South Phoenix shows that prospective buyers of properties there--buyers like the Johnsons--are at least twice as likely to be turned down for financing than people in more affluent parts of town.

In short, the government's own records show that despite fair-lending legislation going back 20 years, "redlining"--the refusal to approve mortgages for minorities in less affluent parts of town--is alive and well in Phoenix.

The small, brick, two-bedroom house sits on Monte Vista Road a few blocks east of 16th Street. It has a neatly trimmed front lawn dotted with cactuses and hibiscus trees, a smooth concrete driveway and a carport. It was built in 1963, but within the last two years has been substantially renovated. Most of the appliances in the kitchen are new, as is the carpeting in the living room and bedrooms. There is an elementary school less than five blocks away. The house is attractively priced around $40,000, and would seem to be an ideal first home for a young couple thinking about starting a family.

Next month, it will have been on the market for a year. There has been no shortage of prospective buyers, the current owners say, but none has been able to obtain financing.

The problem with the house is not amenities, condition or price, but location. It sits near the center of census tract 1116, which stretches from 16th Street to 24th Street and from McDowell Road to Thomas Road.

Most of the people who live in census tract 1116 rent their homes. The relatively low rate of resident homeownership in the area may be explained, at least in part, by the reluctance of local banks and other lenders to approve mortgages in the area. Though there are at least two dozen homes on the market there now--some admittedly in better shape than others--federal data show that last year only two purchase loans in the neighborhood were approved. Three were turned down. The two who got loans were white. The three who didn't weren't.

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Dave Plank