State Investigations into Redlining Continue

In mid-October, Pennsylvania’s Attorney General Josh Shapiro ratcheted up an investigation into redlining by calling on Philadelphia residents to file official complaints if they feel they have been redlined when applying for mortgage or home loans. In addition to Pennsylvania, there are investigations in Washington, D.C. and four other states, including Delaware, Illinois, Iowa, Washington.

Many of the investigations began after Reveal published an investigative article on redlining, finding that “black applicants were turned away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three.” The reports’ authors controlled “for nine economic and social factors, including an applicant’s income, the amount of the loan, the ratio of the size of the loan to the applicant’s income and the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property.

The Pennsylvania investigation has been the most active. Most recently, Shapiro has called on Philadelphia residents to file complaints if they had experienced “redlining tactics or irregularities,” including:

• Difficulty getting an in-person appointment with a loan officer;
• Not receiving a written pre-approval or quote when the loan officer promised one;
• Not receiving return phone calls from a loan officer; and
• Refusal to provide a loan application after the loan officer learns of the race of the applicant, the racial makeup of the neighborhood where the consumer intends to buy the home or other information relating to the racial or ethnic characteristics of the area.

Shortly after the Reveal article published in February, the National Community Reinvestment Coalition (NCRC) released their own study on redlining, finding that “the economic and racial segregation created by ‘redlining’ persists in many cities” today.

“Homeownership is the number-one method of accumulating wealth, but the effect of these policies that create more hurdles for the poor is a permanent underclass that’s disproportionately minority,” said John Taylor, president of the NCRC.

Unfortunately, it appears that certain financial institutions have continued the illegal practice of redlining. State investigations are one way of fixing the problem but not the only way. In Connecticut, a non-profit is taking a different approach. Rather than calling on the attorney general to investigate, the Connecticut Fair Housing Center has filed suit against Liberty Bank, alleging that the bank violated the Fair Housing Act by using statistical tricks to continue redlining their customers.