Finance First Friday: Redlining and Housing Injustice

After completing the Anti-Racism training in June and July I wanted to learn more about financial and administrative injustice. As well as increasing my personal awareness of racist policies and practices that have oppressed our black and brown neighbors, I am curious about how I can bring that awareness to my work at St. John’s. So, it felt like divine providence when I received an email from parishioner, Christopher Matter, offering to write a post regarding his work towards financial equity.

When not enjoying his beautiful family, Chris works as a federal bank regulator responsible for consumer compliance laws and regulations for several financial institutions in the upper Midwest. Below, Chris gives us some historical background and tools for increasing our awareness around redlining and housing injustice.

And Jesus knew their thoughts, and said unto them, every kingdom divided against itself is brought to desolation; and every city or house divided against itself shall not stand: – Matthew, 12:25 (King James Version)

I love historical neighborhoods and homes. Most days I can be found before dawn running and weaving between historical streets here in Saint Paul or on the weekends out amongst the lakes in Minneapolis. The closely situated homes and old growth trees are reminiscent of my hometown of Milwaukee, Wisconsin and provide a bucolic background.

What these three cities, Minneapolis, Saint Paul, and Milwaukee all have in common, as do most large American cities, is despite beautiful architecture and narrow streets is an invisible line of established racism and segregation.

In my daily life, I work in a team that oversees several laws that were passed to reverse centuries of inequality and decades of poor access to housing for minority populations. There are numerous laws, but the most expedient to discuss is the Civil Rights Act of 1968 (sometimes called the Fair Housing Act), and the Community Reinvestment Act of 1977. My goal by outlining some examples here is to give members of our community a shared resource of information to better navigate discussions related specifically to housing inequality as people of faith.

During another economic downturn, the Great Depression, the Roosevelt Administration passed several policies aimed at jump starting the economy. The National Housing Act of 1934 created the newly minted Federal Housing Administration. The goal of this agency was simple: slow foreclosures and make home ownership available to (some) of the population. Working together with a government sponsored lending arm, the Home Ownership Loan Corporation, agents assessed the desirability of homes through a system of mapping. Before Google had cameras strapped to the top of trucks taking pictures of streets, mappers made meticulous details on neighborhoods down to the block level.  An example from my hometown of Milwaukee in 1938 is below:

Image Source: (https://www.wiscontext.org/how-redlining-continues-shape-racial-segregation-milwaukee)

If you are interested in finding more maps for your area, interested in the ways that your neighborhood may have been shaped by these racist maps, please visit the National Community Reinvestment Coalition (https://ncrc.org/holc/)

These maps used a color-grading system to delineate ‘desirability’ in an overt racist way. Areas colored in green were considered ‘safe’ for lending and a highly desirable area. Sliding down the scale to the end where a ‘red’ grade meant builders and lenders should avoid these areas. It is from these maps that the modern term ‘redlining’ gets its name. These areas in red were vibrant communities with families and places of worship whose only difference from the green areas was that it was more than likely to have populations with high minority populations.

These maps had an incredibly damaging impact on access to housing. The maps created by staff at the Homeownership Loan Corporation were used by lenders across the country in making determinations about where to originate home loans for consumers. These decisions and maps effectively installed housing segregation for decades in cities across the United States. An additional layer was installed by the builders of communities, who installed covenant’s that would bar persons of color from purchasing a home in their development even if a person could obtain the necessary financing. The US Supreme Court struck down racial covenants in 1948 (https://supreme.justia.com/cases/federal/us/334/1/) but it would be decades before another concerted effort to unwind the destructive efforts of redlining would come to fruition.

Civil rights leaders in the 1960’s identified that the goal of creating long-term sustainable racial justice was inexorably tied to access to quality housing freedom. The Civil Rights Act of 1968 includes Title VIII which is focused on rectifying decades of housing abuses. This first step prevented lenders from making loans on explicitly racist or sexist terms.

Despite these gains, civil leaders and those elected in congress identified that increased oversight is needed to verify that lending practices had changed and reverse redlining’s damage in its communities. In that vein, Congress passed two laws, the Home Mortgage Disclosure Act of 1975 (HMDA) (Link: https://www.ffiec.gov/hmda/), and the Community Reinvestment Act (CRA) of 1977 (Link: https://www.federalreservehistory.org/essays/community_reinvestment_act). HMDA’s original goal was to address concern that financial institution’s may not be originating home loans to otherwise qualified applicants in urban areas. As a result, financial institutions located near cities or metropolitan statistical areas (MSAs) are required to report a short form of their data annually for regulators to review for any evidence of redlining. The passage of the CRA also evaluates whether banks are lending to low- and moderate-income communities in several different types of loan products (example: automobile or personal loans).

The advantage of these laws for community groups and citizens is that it makes a bank’s lending patterns available for public review. In our internet age, a person can look up their financial institution’s current public file and rating.

If you’re interested in reviewing HMDA data for your area, the Consumer Financial Protection Bureau has a great tool to analyze data: https://www.consumerfinance.gov/data-research/hmda/.

A helpful link to start reviewing CRA information is here: https://www.ffiec.gov/craadweb/DisRptMain.aspx. A bank’s CRA rating and evaluation is a free, public document that can be requested to review by any person.

As our communities continue the work towards creating a more just and equitable city, state, and nation, there are a number of tools available for concerned people of faith to use to evaluate how well our local financial institutions are performing in important issues like housing.

Thank you Chris, this gives us all a lot to reflect on!

Discussing finances can be difficult but, as we have learnt here, money can have real impact in all our lives. Jesus talked about money and possessions more than prayer and faith, so we invite you to share your financial experiences and tools. To submit a post, share resources, or do an interview please contact Executive Administrator, Sarah Dull – you never know who needs to hear your story.

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