|Redlining in Black Communities||<– Date –> <– Thread –>|
|From: rehm (rehmrust.zso.dec.com)|
|Date: Thu, 15 Apr 93 12:20 CDT|
------- Forwarded Message Date: Thu, 15 Apr 1993 08:45:37 PDT Reply-To: Activists Mailing List <ACTIV-L@MIZZOU1.BITNET%pucc.Princeton.EDU> Sender: Activists Mailing List <ACTIV-L@MIZZOU1.BITNET%pucc.Princeton.EDU> From: New Liberation News Service <nlns [at] igc.apc.org> Subject: NLNS: Redlining in Black Communities To: Multiple recipients of list ACTIV-L <ACTIV-L@MIZZOU1.BITNET%pucc.Princeton.EDU> /* Written 8:34 pm Apr 14, 1993 by nlns [at] igc.apc.org in igc:nlns.news */ /* ---------- "NLNS Packet 3.11 *** 4-14-93" ---------- */ Loan Rejected: Redlining on Black Communities Kevin Cartwright, Diatribe (NLNS)--Redlining is a reality in African American communities across the United States. It is a practice which discriminates against Blacks of all economic sectors when they apply for home and business loans and consumer credit. Blacks, more than any other racial/ethnic group (with the possible exception of Native Americans), receive less credit. Internal erosion and decay of Black communities can be attributed to a community's inability to realize its full potential and produce the best of itself because of lack of funding, thus leaving abandoned homes and buildings as skeletons of a former past. Although redlining goes back many years, it has recently taken on the veneer of conspiracy; it is a widespread practice that disregards such legislation as the Community Reinvestment Act (CRA) of 1977, which requires banks to reinvest in communities of color. The 1990 Federal Reserve Board report on mortgage lending showed that Blacks were at least twice as likely to have mortgage applications rejected than whites. According to Black Enterprise magazine, the FRB report "reviewed 6.4 million loan application records from 9,281 lending institutions nationwide. It revealed that, in 1990, 33.9% of Black applicants were denied conventional mortgage loans as compared to 14.4% of white applicants, and 26.3% of Blacks were denied government-backed mortgage loans compared to 12.1% of whites." This disparity is indicative of a widespread pattern of undermining Black economic empowerment and community renewal. Theoretically, the criteria for the approval of home mortgage loans are income, existing debt, and credit history. Banks and other lending institutions contend that Blacks are "higher risk" applicants. To rationalize loan rejections, banks often invoke the stereotype of Blacks as disproportionately downtrodden, as the working poor, and as more likely to change jobs frequently for hope of higher pay. Another "rationale" is that banks would not gain a profit if they extended small loans on moderately-priced homes which they contend are requested overwhelmingly by Black applicants. Banks simply reject Black applicants instead of burdening themselves with processing applications. Credit history is another reason given for high rejection rates. Upon closer examination, however, there is an obvious double standard as the loan distribution patterns do not correspond solely to credit history. In a given metropolitan statistical area (MSA), Blacks with income at or above the 120% median (which is considered middle income as opposed to 80% which is lower income status), and without the "problems" of credit history et. al., have the highest rejection rate at 21.4%, compared to whites at 8.5%, Asians at 11.2%, and Latinos at 15.8%. Contrary to popular opinion, "affirmative action" for whites is a serious reality. Comparing a Black applicant at or above 120% of an average American income to a lower-income white applicant at 80%, the white applicant is statistically more likely to have a loan approved. This travesty also extends to Blacks and other people of color who wish to renovate or rehabilitate abandoned buildings in poor communities. Because banks carry such a heavy bias against these types of reclamation projects, they rarely come to fruition, since loans are rejected; thus, it is clear that middle-income people are equally affected as lower-income people. Black businesses are also being treated unfairly by redlining. Andrew Brimmer of Black Enterprise has written that according to a survey of Black-owned businesses in Atlanta, St. Louis, Miami and Dade County, Florida, a pattern has emerged. He says, "Black applicants were turned down at a higher rate than whites, were more often required to have collateral, needed co-signers or guarantees even when they had firm government contracts, and usually raised less working capital using such contracts as collateral." There exists a legal requirement apparently intended to ensure that banks and other financial institutions reinvest in minority communities. The 1977 Community Reinvestment Act is on the books, yet the Federal Reserve Board, which is supposed to monitor violations of this act, has complicitly given banks who practice redlining satisfactory CRA ratings on a regular basis. In California, this is very much the case: Bank of America, First Interstate Mortgage, Security Pacific, Wells Fargo and many others have been gracious recipients of satisfactory CRA ratings despite their history of redlining patterns. It is also painfully evident with Japanese-owned banks in California. The Greenlining Coalition of San Francisco and the National Community Reinvestment Network of Boston provided data on five major Japanese banks with combined assets of $37 billion. The data showed that only 68 out of 3,287 loans were extended to Blacks, yet their CRA ratings were deemed satisfactory. To their credit, however, the Bank of Tokyo has set a goal of 20% loans to minority- and women-owned businesses. Nevertheless, this type of neglect speaks of racism, discrimination and an obvious racial preference in lending. But there are ways to combat this problem. The Greenlining Coalition is doing superlative work in this area. They have negotiated with government officials and executives of parent banks to deal with redlining in California. The Association of Community Organizations for Reform Now (ACORN) is a national organization committed to reversing insufficient lending in poor neighborhoods. They have exercised considerable muscle around potential interstate banking mergers by negotiating agreements for new community plans. Without satisfactory CRA ratings, no merger can take place. The merger between the C&S/Sovran of Atlanta with NCNB of Charlotte, N.C., extracted a 10-year, $10 billion community lending agreement, thanks to the efforts of ACORN. In Philadelphia, Fidelity Bank has taken even more meaningful steps in the right direction by working closely with ACORN, churches and community groups to help facilitate the loan process. This coalition screens potential borrowers and assists them with application filings; it also helps a borrower who has fallen behind to rearrange his or her finances to make payments. ACORN also persuaded Continental Bank of Philadelphia to apply alternative criteria for low income, no credit applicants. They agreed to waive an employment standard--a worker having to stay two years at the same job--and only require an applicant to have been employed continuously over three years. "We've come to understand that the poor have different income streams, and that no credit doesn't necessarily mean bad credit," says Continental Senior Vice President Ralph F. Desderio. According to Business Week, "out of 150 low-income mortgages, none has defaulted and only three are more than 60 days past due." As to the extent of attempts by the federal government to address the redlining issue, the federal agency of Housing and Urban Development (HUD) has sponsored a "sting" operation to expose lending institutions that discriminate against minority loan applications. They will send minority and white testers of comparable income and credit characteristics into bankthrifts and mortgage companies to apply for loans to purchase homes in the same neighborhood. Despite good intentions, however, this is not nearly enough. Communities disproportionately affected by redlining must find innovative ways to rectify this problem. Community control of financial institutions is the logical direction to go. Community-development credit unions must be established and maintained to address biases in lending. There are roughly 400 community-development credit unions designed to do this, and the Black community and other communities of color can ill- afford to have banks like Harlem's Freedom National Bank fall by the wayside without something to buffer or replace it. This era is still one of last hired, first fired. And it remains the era where government is hostile to poor people doing anything in the way of self-empowerment, particularly with respect to economic empowerment. It is in the best interest of all to be firm and direct about the economic direction of these communities; otherwise, boarded storefronts, abandoned homes, an absence of lending places, and check-cashing establishments will dominate, as they do now, for ages to come. Diatribe is published by the People of Color News Collective at UC Berkeley, and they can be reached at 700 Eshleman Hall, Berkeley CA 94720; psloh [at] garnet.berkeley.edu - --- 30 --- ------- End of Forwarded Message
- (no other messages in thread)
Results generated by Tiger Technologies Web hosting using MHonArc.