Friday, September 25, 2015

DOJ and HUD Target Redlining

Regular readers know that one of the untold success stories of the Obama administration that I tend to focus on is the way the Civil Rights Division at the Department of Justice has been reformed after it was decimated during the Bush/Cheney years. Under the initial leadership of Thomas Perez (who is now the Secretary of Labor) and now Vanita Gupta, the division has been aggressively investigating police brutality and defending voting rights. And so, of course, I noticed this story reported by Sarah Lynch:
Hudson City Bancorp will pay nearly $33 million to settle civil charges alleging the New Jersey-based bank wrongfully discriminated against prospective black and Hispanic home buyers, in a case that marks the largest ever redlining settlement in history, the U.S. government said on Thursday.

The joint action by the U.S. Justice Department and the Consumer Financial Protection Bureau said that Hudson City Savings Bank tried to avoid locating branches and marketing mortgages in neighborhoods with a majority of black and Hispanic residents...

“This case should send a message to lenders throughout the country that the Justice Department will not tolerate racial discrimination in the extension of credit,” said Principal Deputy Assistant Attorney General Vanita Gupta, the head of the Justice Department's Civil Rights Division, in a statement...

Gupta said Thursday that the settlement is the largest the Justice Department has ever struck both, in terms of the monetary amount and the geographic regions covered.

She added that the civil rights division has recently seen an increased number of active redlining investigations.
As the work of the Civil Rights Division was restored, several settlements were reached with banks like Wells Fargo and Countrywide for systematically charging higher fees to Black and Hispanic customers as well as steering them into costly subprime mortgages. But Emily Badger points out how this case marks a more aggressive approach to combating discrimination.
Hudson City, unlike several other banks recently accused of discrimination, wasn't charged with denying loans to qualified minorities, or jacking up their interest rates. In a subtle but more insidious claim, the government says it was "structuring its business so as to avoid majority-Black-and-Hispanic neighborhoods."

Hudson City, in other words, was set up to ensure that few borrowers in minority neighborhoods ever even applied in the first place, according to prosecutors.
This is a classic case of the practice known as "redlining."
"Redlining" just sounds like an an old-timey term, a practice that exists only in history and our re-tellings of it. The word has particular roots in the 1930s, when the government-sponsored Home Owner's Loan Corporation first drafted maps of American communities to sort through which ones were worthy of mortgage lending. Neighborhoods were ranked and color-coded, and the D-rated ones — shunned for their "inharmonious" racial groups — were typically outlined in red.

This government practice was swiftly adopted by private banks, too, during an era of massive homeownership expansion in the U.S. And the visual language of the maps became a verb: To redline a community was to cut it off from essential capital.
It is interesting to note that the Department of Housing and Urban Development, under Secretary Julian Castro, is also targeting the practice of redlining.
The U.S. Department of Housing and Urban Development (HUD) today announced an agreement with Associated Bank, N.A. (Associated) to resolve a disparate treatment redlining case, one of the largest redlining complaints brought by the federal government against a mortgage lender. At approximately $200 million, it is the largest settlement of this kind HUD has ever reached.

The settlement stems from a HUD Secretary-initiated complaint alleging that from 2008-2010, the Wisconsin-based bank engaged in discriminatory lending practices regarding the denial of mortgage loans to African-American and Hispanic applicants and the provision of loan services in neighborhoods with significant African-American or Hispanic populations.
As Ta-Nehisi Coates has documented in articles like "The Ghetto is Public Policy," when we see practices like redlining, it is clear that "the wealth gap is not a mistake." These actions by the Obama administration cannot undo the past practices that led to that gap. But they can ensure that it doesn't affect generations going forward.

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