Shelterforce: Say It With Your Chest: Race Matters in Lending

Shelterforce, March 24, 2022, Say It With Your Chest: Race Matters in Lending

For decades, the federal Equal Credit Opportunity Act has allowed banks to offer special mortgage programs specifically for “disadvantaged” homebuyers. The law creates an exception to anti-discrimination rules so banks can boost their lending to people of color and other underserved groups without having to worry about being sued. These special purpose credit programs, or SPCPs, are potentially powerful tools to extend credit and subsidies to would-be buyers who are struggling to get mortgages. Fair housing advocates say the programs could help raise persistently low homeownership rates among Black and Latino families, and begin to narrow their massive deficit in household wealth compared to white households.

Advocacy groups like the National Community Reinvestment Coalition (NCRC) argue that regulators should add an explicit racial focus to the CRA regulations to drive more lending in Black neighborhoods.

“As there has been more and more conversation around the racial wealth divide, part of that argument is that income levels hide the extent of inequality. That reinforces this idea that LMI is not as clarifying as race or wealth. Instead of using another measure as an indicator of race, why not explicitly go at race?” said Dedrick Muhammad, chief of membership, policy, and equity at NCRC. “That’s what we’re trying to solve for, that African Americans of low income or moderate income still have radically lower wealth levels.”

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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