Bigotry evident in continued bank redlining

African-Americans and Hispanics are beginning to lose ground when it comes to the use of traditional banking, according to the Center for Responsible Lending. Redlining and similar methods of financial/racial discrimination haven’t faded away, regardless of regulatory efforts. Denial of short term installment loans and mortgages by banks to ethnic minorities in the United States suggest that the racial divide continues to gape wide. Article resource – Racial discrimination evident in continued bank redlining by MoneyBlogNewz.

Statistics show minorities are losing homes twice as fast as Caucasians are

Center for Responsible Lending President Michael Calhoun told USA Today that U.S. minorities have "received the worst treatment, at a very high cost." Estimates that 20 percent of African-American and Hispanic householders will lose their houses in the mortgage crisis – a rate more than double that of white householders – suggest the gap between the minority and the majority is growing.

African Americans are 41.7 percent more likely to be denied a traditional bank loan than a Caucasian person is according to a 2008 study done by Christian Weller called "Credit Access, the Costs of Credit and Credit Market Discrimination." Weller is of the Center for American Progress and the University of Massachusetts. The gap widened considerably when mortgages were in question.

The inequity of a ‘dual system of finance’

John Taylor is the National Community Reinvestment Coalition CEO. He said a double standard is present.

"It's about a dual system of finance," he says. "People of color do not have the same access that most American citizens enjoy.

The option when traditional banks deny low or middle-income minorities credit is frequently no credit check payday loans from personal loan companies. NAACP Senior V.P. for Advocacy and Policy, Hilary Shelton, explained that there are generally higher fees on these than traditional loans even though they’re convenient for a financial emergency. Mortgage loans aren't swapped out by payday loans either.

Deregulation in banks

There were entire minority neighborhoods that were not able to get bank loans, mortgages and insurance in the 1990s which got many people noticing. The practice of redlining started with banking and utility deregulation because of this. While regulators installed such mechanisms as the Community Reinvestment Act and Home Mortgage Disclosure Act to help combat redlining, further loosening of the oversight belt allowed the practice to continue in various forms (for instance reverse redlining, where short term bank loans are offered in minority neighborhoods, however at prohibitive rates). This ultimately led to the Wall Street crisis, from which the U.S. is nevertheless recovering.

Changes regulators are making

• A two-year short term loan program is being piloted by 28 banks. The FDIC suggested this.
• The Department of Justice has created a fair lending unit to police redlining.
• July 2011 can be the start of the CFPB.

Articles cited

Peri

peri.umass.edu/fileadmin/pdf/working_papers/working_papers_151-200/WP171.pdf

IBEW

ibew1613.org/library/redlining.html

USA Today

usatoday.com/money/perfi/general/2011-04-04-real-estate-financial-discrimination.htm

Did banking deregulation stack the deck against minorities?

youtube.com/watch?v=FDYXAywWWdk