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Redlining: Still Present Today

Posted March 19, 2010 by Matthew Denton

A closer look at how this malpractice affects our lives

Under the Federal Law, redlining is prohibited for it illegally denies real estate loans on properties that were designated as too risky. Changing geographical areas with large minority groups since it is assumed to have higher lending risks has affected low-income areas in the past and was deemed unjust to minorities as well.

This malpractice is not supported by too many researches as observed by Dr. M.B. Aalbers of Universiteit van Amsterdam. He writes, “Up until this day no research has systematically compared redlining practices in different countries and in different times. In fact, geographical conditions of redlining that are at the hard of the definition of redlining are often lacking from redlining research.”

But recent study released last February proves that amidst the dearth of research available, some findings may startle us. The California Reinvestment Coalition revealed that five California cities have banks and lenders that violated the law against redlining. The report states, “What the data indicate is an alarming trend of dispossession in neighborhoods with high concentrations of African American and Latino residents. Not only have these areas received a devastating amount of predatory home loans—and subsequent defaults—but they also receive markedly low numbers of loan modifications and an accompanying bigger drop in the origination of new prime loans than other neighborhoods.”

What’s more disturbing is that some key findings indicated in the research suggest redlining is highly practiced in a state that is supposed to uphold the law. It adds, “Re-redlining is occurring as lenders deny credit to communities most affected by bad bank practices: Neighborhoods of color saw a dramatic decrease in lower-cost prime loans in 2008: There were stunning drop-offs from 2006 to 2008 in Oakland, which went from 3,901 prime loans to 1,301; and Los Angeles, which went from 17,615 prime loans to 4,623.”

Another study speaks of a more alarming truth. GIS for Equitable and Sustainable Communities states in its research “Racial Redlining: A Study of Racial Discrimination by Banks and Mortgage Companies in the United States” that “The level of minority population concentration that triggers the exclusion of minority neighborhoods from effective lending territories can vary considerably from one lender to the next within the same metro area and more systematically between lenders in different metro areas. Worst case lending patterns frequently involve exclusion of neighborhoods in which minorities comprise 50 percent or more of the population, but in some situations a lender may not begin to exclude neighborhoods until the minority concentration level reaches 75%. In some cases, the pattern of exclusion will vary depending on whether a minority neighborhood is predominantly Black or Hispanic.”

With these news and studies, isn’t it time that our Fair Housing Act be strictly observed by the real estate community seriously? Violating housing policies especially that deal with fair and equality is a threat to urban investment and progress. What our lawmakers must also understand is that redlining can affect mortgage terms aside from loan volumes. It needs to be stopped and it can only be implemented as well if the public does its responsibility of speaking up.

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