The American Prospect, June 17, 2020: How to Start Closing the Racial Wealth Gap
Historically, federal housing policies played an important role in creating the homeownership gap. From the 1930s through the 1960s, the Federal Housing Administration refused to insure mortgages in predominantly Black neighborhoods, which made it difficult for Black buyers to get mortgages to buy homes. The effects of federal redlining are still discernible in the segregation patterns of major cities.
Federal redlining and other explicitly discriminatory policies ended with the Fair Housing Act of 1968, but today a supposedly neutral, but functionally discriminatory, federal policy undermines minority homeownership. Since 2007, the Federal Housing Finance Agency has required that Fannie Mae and Freddie Mac charge “loan-level pricing adjustments” (LLPAs) to lenders who sell them mortgages. This was intended to protect Fannie and Freddie from being stuck with ever-riskier loans from lenders, without being properly compensated for the danger.
