Redlining
is an unethical practice that puts services (financial and otherwise) out of
reach for residents of certain areas based on race or ethnicity. It can be seen
in the systematic denial of mortgages, insurance, loans, and other financial
services based on location rather than an individual’s qualifications and creditworthiness.
The
policy of redlining is felt the most by residents of minority neighborhoods. It's
also considered redlining when real estate agents steer you toward particular
neighborhoods based on any of the above factors. They must use inclusive
advertising and marketing strategies, as well as inform you of your rights. While the best known examples of redlining have involved denial of financial services such as banking, insurance, health care, or even supermarkets. Another practice called "reverse redlining" involves lenders targeting a specific neighborhood when marketing high-cost mortgage loans.
The
Fair
Housing Act
is contained in the Civil Rights Act of 1968 and it was modified by the Fair
Housing Amendments Act of 1988. The act makes it illegal to discriminate in the
sale, rental, advertising, or availability of real estate transactions due to
factors that form the basis for redlining:
·
Race
·
Color
·
Religion
·
National
origin
·
Sex
·
Disability
·
Familial
status
Federal law prohibits home lending discrimination, notably the 1968 Fair Housing Act and the 1977 Community Reinvestment Act (CRA). The first of these laws bans discrimination based on someone's race when the person is trying to rent or buy a home, as well as apply for a mortgage. The act also makes it illegal to impose predatory interest rates or fees.
The
term redlining is how lenders identified neighborhoods with a greater share of
people deemed more likely to default on mortgage. Using red ink, lenders
outlined on paper maps the parts of a city that were considered at high risk of
default, as well as more desirable neighborhoods for approving a loan. Riskier
neighborhoods were predominantly black and Latino. Physical copies of
such maps are stored in the National Archives.
Lenders must evaluate each of the factors below
without regard to race, religion, national origin, sex, or marital status of
the applicant.
Banks may legally take the following factors into consideration when deciding whether to make loans to applicants and on which terms:
Banks may legally take the following factors into consideration when deciding whether to make loans to applicants and on which terms:
·
Credit History- Lenders may legally
evaluate an applicant’s creditworthiness as determined by FICO
scores and reports from credit bureaus.
·
Income-Lenders may consider an
applicant’s regular source of funds, which can include income from employment,
business ownership, investments, or annuities.
·
Neighborhood Amenities and City Services-Lenders
may take into account amenities that enhance or detract from the value of a
property.
·
Property Condition- A lending institution
may evaluate the property on which it is making the loan as well as the
condition of nearby properties. These evaluations must be based strictly on
economic considerations.
·
The Lending Institution’s Portfolio-
Lending institutions may take into account their requirements to have a
portfolio that is diversified by region, structure type, and loan amount.6
“Courtrooms across the country are our
protection against redlining and discrimination. The courts must not undo,
rewrite or reinvent the spirit of our laws protecting American's civil rights.
Whoever really believes in our court system, believes in our constitution. The
Fourteenth Amendment guarantees every American equal protection under the law.”
(Barbara Mikulski)[i]
[i] Sources used:
·
“Redlining” By Will
Kenton
·
“Redlining” From
Wikipedia
·
“Redlining's legacy: Maps are gone, but the
problem hasn't disappeared” By Khristopher J. Brooks
·
“What Is Redlining?” By Elizabeth Weintraub
This topic was suggested
by friend and blog member, Juli Critser.
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