The U.S. Justice Department says it’s going to do something about redlining, the systematic denial of various banking services to residents of specific, often racially associated, neighborhoods or communities. The U.S. Justice Department recently unveiled a new measure to investigate discriminatory lending practices in the mortgage industry.
The government’s new Combating Redlining Initiative will use redirected federal resources to investigate concerns related to fair lending practices, agency officials say.
Over the decades, redlining has prevented untold numbers of Black Americans from owning homes. Redlining was prohibited by the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974. But potential Black homeowners complain it still exists.
Black Americans were denied mortgages at higher rates than their white counterparts in 61 urban environments, a 2018 investigation conducted by the National Community Reinvestment Corporation found. This report laid the foundation for a series of investigations that concluded that banks still practice redlining despite it being illegal.
According to U.S. Attorney General Merrick Garland, the Combating Redlining Initiative is the greatest effort to combat the practice of redlining in U.S. history.
“Lending discrimination runs counter to fundamental promises of our economic system,” Garland said in a press statement. “When people are denied credit simply because of their race or national origin, their ability to share in our nation’s prosperity is all but eliminated. Today, we are committing ourselves to address modern-day redlining by making far more robust use of our fair lending authorities. We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit.”
Redlining Practices: Past and Present
Redlining is a discriminatory practice that denies mortgages and other credit-related services to individuals or communities due to race or nationality. The term was initially coined to show how financial institutions would carve a highlight on a map with a red line around neighborhoods they did not deem investment-worthy based on demographics.
Black American neighborhoods were consistently redlined — and still are, argues Keeanga-Yamahtta Taylor, a professor in the Department of African American Studies at Princeton University.
The Fair Housing Act and The Equal Credit Opportunity Act were supposed to make the real estate industry fairer.
The Fair Housing Act protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or participating in other housing-related activities.
The Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program. It bans discrimination in home mortgage loans or home improvement loans.
But the reality is that “private sector forces, including mortgage lending banks and real estate agents, ensured that the same principles of segregation that had girded the private housing market for the entirety of the 20th century became the guiding principles of the new HUD Act housing initiative,” writes Taylor in her 2019 book “Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership.”
The U.S. Department of Housing and Urban Development oversees national policy and programs that address America’s housing needs as well as enforces fair housing laws.
Taylor added, “These same corrosive public-private relationships undermined the regulating capacity of HUD. It wasn’t just the real estate industry. White suburban homeowners and the elected officials who did their public bidding passed intricate and specific zoning ordinances that were intended to keep African Americans out of their communities.”
Recent studies reveal Taylor’s claims hold true.
The Consumer Financial Protection Bureau (CFPB) recently revealed that lenders strategically target white neighborhoods with marketing campaigns featuring white families and loan officers. These practices ultimately discourage minority applicants from applying for mortgages and becoming homeowners.
Several current lawsuits center on redlining. In early October, the Fair Housing Center of Central Indiana, a nonprofit advocacy group, filed a federal lawsuit against Old National Bank, the largest Indiana-based bank, claiming discriminatory residential mortgage lending patterns against its Black customers.
Last year, fair housing organizations filed a lawsuit against Redfin, an online real estate website. The company was accused of “digital redlining” by offering fewer services to homebuyers and sellers in non-predominately white neighborhoods.
Now, according to the Justice Department, the Combat Redlining Initiative aims to eradicate these examples of redlining, making homeownership a possibility for all Americans.
“Enforcement of our fair lending laws is critical to ensure that banks and lenders are providing communities of color equal access to lending opportunities,” said Assistant Attorney General Kristen Clarke for the Justice Department’s Civil Rights Division. “Equal and fair access to mortgage lending opportunities is the cornerstone on which families and communities can build wealth in our country. Our new Initiative should send a strong message to banks and lenders that we will hold them accountable as we work to combat discriminatory race and national origin-based lending practices.”
