In the compliance world, Redlining remains a primary area of focus. Regulatory agencies, no matter their politics or priorities, agree that Redlining hurts communities and stifles growth. We have heard through the grapevine that some examiners are looking hard at Redlining exposure.
In this article, you'll read 11 headlines that illustrate the multiple facets of Redlining - and the media's focus - today.
These days, Redlining is one of the hottest headlines. This attention to Redlining is true not only for the regulators, who are considering Redlining implications as they work through CRA modernization, but also for consumer groups, the public, politicians, and of course, and the media.
For financial institutions, this may seem to amp up the pressure - and for good reason! Consumers are more educated about what Redlining is, and may be looking out for it. Certainly, consumer advocacy and fair housing groups are paying attention to potential Redlining, as we discussed recently and you'll see more of below. The media, from local newspapers to national podcasts, is also keeping a sharp eye on evidence of potential Redlining and its lasting impact on communities they cover. It seems that there has never been a worse time to be negligent of your Redlining risk.
In this post, you’ll see 11 headlines about Redlining that show the media and public’s focus, and why this impacts the reality of Redlining risk.
Allow them to be the motivation you need to prioritize your Redlining risk management and analysis.
0. "For People of Color, Banks are Shutting the Door to Homeownership" - Reveal, February 2018
This one is numbered "zero" because it is really the starting point for a lot of interest in Redlining this year. It's not too much to say that this is the article that re-ignited the Redlining fire in the media.
Focusing on Philadelphia, it told the story of one African-American woman who struggled to get a mortgage loan, and the rejection she faced repeatedly. It's a sad and compelling story, which becomes the foundation for in-depth analysis from the Reveal team.
In fact, this story reportedly launched hundreds of speeches and investigations by local, state, and federal public officials. It's one of a series of a few articles about Redlining and fair housing published by this organization, and all of them are data-backed and well-composed, if highly critical of the banking industry and everyone involved in it.
If you haven't read this story yet, you should, just to understand where much of the public conversation started.
1. "Cleveland Neighborhoods 'Redlined' in the 1930s Are the Same Ones Dealing With Lead, Sexual Assault, Poverty and Poor Internet Issues Today" - Cleve Scene, July 2018
What a headline. In around 20 words, it manages to illustrate the long-lasting harms of Redlining and the importance of resolving this issue for communities. While it focuses on Cleveland, this story could have been written for other similarly sized metro areas.
This story, published in July 2018 by Cleve Scene, tells how researchers from Case Western Reserve University analyzed data related to sexual assault and found a correlation with areas that were formerly redlined. The researchers “found that although the lending practice of rejecting mortgage applications to minorities and for houses in and near specific neighborhoods populated by minorities was banned more than 50 years ago, the effects redlining, unsurprisingly, persist today.”
In addition to the relatively higher levels of poverty, these neighborhoods were also the areas with the highest amounts of lead in resident children’s blood, and the poorest internet connections.
One of the researchers, Misty Luminais, told the Cleveland Scene that “there appears to be a strong relationship between the history of redlining in Cleveland and the steady decline of neighborhoods. If you overlay the redlining maps and some of these other trends, it’s as if you’re looking at the same map.”
This matters because financial institutions, unlike other businesses, have a mandate to support and strengthen their communities. While discriminatory practices were common and accepted decades ago, the focus today is on reducing and reversing the impact of those practices. There is a lot of potential to improve service in and around neighborhoods that were previously redlined.
It also matters because - let’s be totally frank - there is public relations risk to being one of the financial institutions accused of redlining today. While this article doesn’t specifically point to institutions that appear to be under-performing, others do. Bad press is worse than no press. With proactive Redlining data analysis, you can really understand the story your data tells, and work with your marketing and PR teams to ensure that your story is told clearly and honestly.
2. "Redlining was Banned 50 Years Ago. It’s Still Hurting Minorities Today." - The Washington Post, March 2018
This March article from The Washington Post attracted a lot of attention when it was published, and it remains one of the more popular Redlining-related articles. It goes into great detail about the history of Redlining, who was impacted in the early 1900s and how those impacts are still felt today.
The article reports that nearly two-thirds of areas marked as “hazardous” are inhabited by mostly minority residents today. At the same time, 91 percent of areas classified as “best” in the 1930s remain middle-to-upper-income today, and 85 percent of them are still predominantly white, the article said.
For consumers who didn’t know much about Redlining or were interested in the history of the practice, this article serves as a kind of Redlining 101.
3. "Traveling Exhibit Visualizes Redlining and Systemic Inequality" - Street Sense, July 2018
Redlining captured even the art world’s attention this summer. This article, which describes a traveling exhibit on Redlining, showcases how powerful a story Redlining is to individuals of many demographics. Individuals who don’t pay attention to other areas of compliance are paying attention to allegations of Redlining.
Created by Designing the WE, a social impact design studio, the exhibit shows the long-term impact of systematic discrimination from the 1900s.
This exhibit, “Undesigning the Red Line,” will be traveling from New York to Washington, D.C., and will show the redlined maps from 1938 in conjunction with today’s maps. It will also have interactive elements, where visitors can talk about the impact of Redlining on their neighborhoods and their experiences.
As different groups become even more interested in the story of Redlining and the history of inequality in the U.S., we anticipate that projects like this one will become more common.
[Read the article on Street Sense.]
4. "Study: Tampa Bay Homes in Once ‘Redlined’ Neighborhoods Worth Half Those in Other Areas" - Tampa Bay Times, April 2018
This short post from the Tampa Bay Times outlines how neighborhoods in Tampa that were redlined are still suffering the consequences today. The post says that a home in a neighborhood that was once redlined is now worth half of what a home in a non-redlined neighborhood.
One home’s value according to Zillow doesn’t make a convincing statement about the impact of redlining, or the local financial institutions’ efforts to better serve all communities. However, it is interesting that the paper thought that Redlining was an important and relevant topic to cover for its audience.
That just serves to illustrate what a compelling story Redlining is, for media outlets and their readers.
5. "How the Fair Housing Act Failed Black Homeowners" - CityLab, April 2018
This article, much like The Washington Post article shared above, details a history of the regulations against housing discrimination and the alleged impacts today. It was published in by CityLab, a subsidiary publication of The Atlantic, and was also sparked by the Reveal article we have written about previously.
"Fifty years after the Fair Housing Act, the full historical weight of banks’ discriminatory practices is still evident in the persistent racial segregation of communities. While discrimination in lending is illegal, disparities in lending are enormous...Where de jure segregation was once the rule, de facto segregation still persists. For example, in Jacksonville, new home mortgages still fall within the very same lines that banks drew to prevent black families from moving into white neighborhoods or building wealth some 80 years ago..."
"The gulf between black and white households in new home mortgages reflects a vicious cycle—one in which a lack of wealth blocks the creation of new wealth, a cycle spanning generations."
No one contests that banks had discriminatory lending practices in the past, and few would contest that there is some accidental or unintentional discrimination today. Racial discrimination is absolutely wrong, and it is rightfully illegal.
However, many bankers and industry partners would contest that active, targeted discrimination is happening. At TRUPOINT, we don't have any experience that would indicate it's happening as intentionally it would seem, according to some of the news.
There is clear disparity in the numbers being reported. However, disparity does not always mean discrimination. Analyzing your data (in depth and including data related to the factors that contribute to your lending decisions, like credit score) is the only way to know for sure. Your financial institution is the only one who can conduct that analysis, and the only one who can tell your own story fairly and holistically.
Ongoing disparities in access to credit and home ownership between minority and control group individuals are persistent, and they do have serious, negative implications relating to savings potential, neighborhood stability, and other important factors. That said, the claim that home ownership is necessary for access to the middle class is not totally supported.
That's part of what's so interesting about articles like this - they have important, accurate historical information in it, but they don't always tell a whole story. They do tell a compelling story.
As you consider your Redlining, Fair Lending, and CRA risk, it's important to understand the story your data tells, and be able to convey that story accurately, if necessary.
[Check out the City Lab article here.]
6. "Small Bank's Redlining Settlement A Cautionary Tale in Fighting the Government" - American Banker, May 2018
This fascinating article from the American Banker details how one bank tried to fight Redlining allegations from the DOJ. Eventually, they decided to settle for $600M due to "business reasons." The bank will spend the $600M on marketing and credit programs in majority-minority neighborhoods. In addition, they plan to open a branch in Minneapolis in order to better serve communities there.
“At the end of the day, you really have to look at the cost of trying to defend yourself [and] the opportunity cost of not using those resources to grow your business. We felt it was better to reach a settlement ... and find ways to put our resources into supporting these inner-city communities.”
- Doug Hile, CEO of KleinBank, according to American Banker
The DOJ's 2017 allegations were met with clear denials from the bank; 40 other banking associations also supported the bank's opinion that they were not Redlining.
As the headline suggests, this article does make it clear that one does not tangle with the government lightly. Costs are high, and so-called wins are rare. Redlining risk is serious and can be costly, even if you have a strong and compelling case for yourself (in this instance, a case that was supported by many industry groups).
7. "Highlights of Current Issues in Federal Reserve Board Consumer Compliance Supervision" - Federal Reserve Board, July 2018
While not precisely a headline, the headline item in the Federal Reserve Board's Consumer Compliance Supervision Bulletin is Redlining. The Consumer Compliance Supervision Bulletin is a brand-new publication from the FRB that summarized examiners observations from recent exams, increases transparency, highlight violations, and provide practical steps for institutions looking to manage its risk.
"Since 2010, the Federal Reserve has referred six redlining matters to the U.S. Department of Justice (DOJ). The DOJ, the U.S. Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB) have brought several public enforcement actions for redlining. In 2011, the DOJ settled two redlining cases based on referrals from the Federal Reserve.
"The Federal Reserve recognizes that most banks want to serve all consumers and few would intentionally choose to avoid minority areas. Nonetheless, some banks treat minority neighborhoods less favorably."
We will be talking more about this in the weeks to come, but this is a unique perspective on Redlining because it's focused on how bankers can more effectively address their risk. We will be covering their recommendations in the Redlining webinar we are hosting later this month - sign up now!
8. "Guided Bike Tour in Seattle Helps Locals Reckon With the City’s Legacy of Redlining" - NextCity, March 2018
The city of Seattle now boasts a Redlining bike tour. Like nothing else, this headline illustrates the real public interest in Redlining and the way housing issues have shaped cities. (It also illustrates an unusual approach to something as deeply problematic as Redlining discrimination.)
These bike tours are branded as "slow rides" that cater to older women who wanted to get used to urban biking. The tour follows the infamous redline in Seattle's segregated housing past.
The founder of the tour, Merlin Rainwater, said she got the idea for the tour after seeing an exhibit at her local library.
“And as I looked at it, I thought, you know, this is information that really ought to be in Laurelhurst. It should be in Broadmoor. Because black people in the Central District, they know this history. It’s the white folks in the segregated white parts of the city that need to know that there was a struggle for open housing in Seattle.”
- Merlin Rainwater, founder of the Redlining bike tours
Rainwater said most of the women on her tours are white, and she sees it as an important effort to tell more about the history of Seattle to people who may not have experienced the impacts of housing discrimination firsthand.
9. "In Baltimore, the Gap Between White and Black Homeownership Still Persists" - NPR, August 2018
This article, which originally ran as a radio show on All Things Considered, told the story of an African-American mortgage applicant in Baltimore who is navigating the process and detailing her experience. It also talks about the history of homeownership rates in minority communities.
In Baltimore, African-American homeownership is approximately 31 percent of non-Hispanic white homeownership, which is close to the national average, making it a great area for study. In addition, other housing-related factors, like low inventory, increasing home costs, and high property taxes, are also similar to elsewhere in the nation.
This article shows many different aspects of housing in urban areas in the US, from history to today, the real estate market, and more. It's a valuable survey of the issue, and it's clear that consumers and the housing industry at large are paying attention.
10. "How 'Redlining' Still Hurts Home Values Today" - MarketWatch, May 2018
This story, published on MarketWatch, talks about the results of a Zillow research study on the impacts on housing prices in formerly Redlined areas.
"The Zillow report did find that not all cities see this perpetual discrepancy in property values between redlined neighborhoods and other areas. Once-redlined parts of Boston, Minneapolis, Philadelphia and Portland now have higher median home values than other areas. But even then, this seemingly auspicious change of fortune likely doesn’t help people of color."
Although this article did provide some history of Redlining, it mostly focused on home value as an indication on neighborhood prosperity. For example, it doesn't go into depth on changing demographics in these neighborhoods, or whether rising home values are positively impacting individuals or communities of color. Gentrification and other community-related issues are important to consider in any conversation about real estate trends.
Like so many other articles on this list, this story also referenced the research done by Reveal, which shows just how impactful an in-depth, data-driven understanding of Redlining risk can be. The best news? You can have that in-depth, data-driven understanding yourself.
Ncontracts Viewpoint: The fact that Redlining happened in the past is a terrible truth, but financial institutions, community groups, politicians, regulators, examiners, and non-profits today are working to prevent it from continuing.
We believe deeply in the importance of financial institutions to strong, healthy communities. As you work to manage your Redlining risk, and better serve all communities in your market, know that Ncontracts is here to help. We provide Redlining analysis software. If you're ready for a demo, click here.
Related: How to Build a Strong Fair Lending & Redlining Compliance Management System
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