Lending and the Civil Rights Movement
component of the American Dream is to grow wealth by owning and building equity
in property. For most people, borrowing
to purchase a home is the quickest and most basic route to achieving this dream. Although obtaining a home
loan isn’t always
easy, lenders’ decisions are usually based on factors that the borrower can
influence or control. Ethical lenders
look at the totality of a borrower’s situation to make their lending
decisions. Factors such as the value of
the property, the borrower’s ability to make payments, their past performance
on other loans, and the borrower’s credit score all give a lender the
information they need to make a sound lending decision based on the merits of
the loan inquiry itself. When lenders
base their lending decisions on other factors, such as a borrower’s color,
race, sex, or national origin, they are not only acting unethically, they are
breaking the law.
this has not always been the case. Housing
discrimination and segregation in the United States had already been a fact of
life for African-Americans for decades, but the passage of the National Housing
Act of 1934 aggravated this problem by further limiting the population’s access
to mortgages through a process known as redlining.
Beginning in 1935, the newly created Federal Housing Administration surveyed 239 cities throughout the
United States and created “residential security maps” that indicated the desirability of
residential real estate in a given area. Newer or well-established upper-class neighborhoods were
outlined in green or blue to indicate that the property was safe for investment, while minority
neighborhoods were outlined in red and designated as “hazardous” for investments.
(Neighborhoods bordering the redlined areas were outlined in yellow, labeled “definitely
declining,” and were also considered hazardous for lending purposes). Properties that were
located in the red or yellow neighborhoods were not eligible for FHA mortgage insurance, making lenders
reluctant to lend in the area and giving them official cover against charges of discrimination.
dried up the credit that was available to borrowers in outlined areas making it
difficult for neighborhoods to attract homeowners and accelerating the process
of urban decay in the heart of American cities.
African-Americans and other minorities became trapped in the inner
cities of America where there were fewer and fewer economic opportunities. The
effects of this policy have had far-reaching consequences that are still with
the 1940’s, the Civil Rights Movement was a concerted effort by
African-Americans to correct these types of wrongs by securing constitutional
rights for all Americans, regardless of color, race, sex, or national
origin. Among the movements many
achievements, one of the most important was securing the passage of the Civil
Rights Act of 1968, also known as the Fair Housing Act. This act makes it illegal for lenders or
landlords to make credit and housing decisions that discriminate against anyone
due to race, color, religion, or national origin. (Later amendments to the act added sex and
familial status as protected classes in 1974 and 1988, respectively).
Fair Housing Act didn’t cause an immediate change to the practice of redlining,
it gave civil rights activists an important tool to use in the fight to roll
back redlining’s effects on America’s minority neighborhoods. Beginning in the
organizations began using the Fair Housing Act and similar laws as the basis
for lawsuits against banks and other lending institutions. This exposed companies
that continued to redline and led to the passage of additional laws, such as
the Community Reinvestment Act of 1977, aimed at ending the practice.
ability to pursue the American dream through property ownership is more of a
reality than it has ever been thanks to the efforts of the Civil Rights
Generation. Regardless of our own race,
color, religion, or national origin – we owe them a debt of gratitude for their
service on our behalf.