Update on Mortgage Lending Discrimination

Dollars & Sense: In the 1980s and early 1990s, racial discrimination in mortgage lending resulted in less access to home loans for predominantly black and Latino borrowers and neighborhoods. Home mortgages were a fairly standardized product, and the problem was that banks avoided lending in minority neighborhoods (redlining) and denied applications from blacks and Latinos at disproportionately high rates compared to equally creditworthy white applicants (lending discrimination).

Soon afterwards, however, a different form of lending discrimination rose to prominence as high-cost subprime loans became increasingly common. Precisely because borrowers and neighborhoods of color had limited access to the traditional prime loans, they were vulnerable for exploitation by predatory lenders pushing the new product.

Redlining was soon over-shadowed by “reverse redlining.” Instead of being ignored, borrowers and neighborhoods of color were now aggressively targeted for high-cost subprime loans. Community groups documented and aggressively publicized the problem, and the U.S. Department of Housing and Urban Development (HUD) reported in 2000 that “subprime loans are five times more likely in black neighborhoods than in white neighborhoods.” Read more.