Mortgage discrimination or mortgage lending discrimination is the practice of banks, governments, or other lending institutions denying loans to one or more groups of people primarily based on race, ethnic origin, sex, or religion.
Recognizing Mortgage Discrimination
Mortgage Discrimination is hard to identify due to the nature of loan practices and applications. However, there are a few common characteristics which to identify it:
Even if you have qualified for a larger mortgage, the lender discourages you from taking out the loan.
Your lender is showing excessive and unusual interest in the details of the neighborhood you’re currently living.
The lender tries to influence your decision to take out the loan.
Your application is rejected, and the lender doesn’t tell you the reason.
You are charged a high-interest rate even if other lenders have asked for a low-interest rate.
You are asked to pay too many fees for the loan and not explained it.
You are pressured to agree to the lender’s terms without reviewing them.
Mortgage Discrimination Summary:
The term Mortgage Discrimination is the act of differing banks, governments, and other forms of lenders denying loans for different mortgages. For these types of lenders to be known as completing discriminatory acts, banks, government agencies, or other lends have to deny services on one of the following: the basis of their race, ethnicity, gender, or religion.
One major element that is still a dream to achieve in America is owning one’s home in a neighborhood f choice. When someone owns their home, it makes the homeowner feel special. They have control of where they are living and are putting something towards increasing their livelihood and strengthening their own neighborhoods and communities. However, during a time of uncertainty and unjustness, there have been cases where lenders, appraisers, insurance brokers, bankers and government employees discriminated against buyers during the homebuying process.
Whenever it comes to discriminating during the mortgage lending process, there are two major distinctions: different treatment and disparate impact. In reading over these differing measurement strategies of discrimination, the distinction must be made between the two to form strategies to remedy these two forms of mortgage discrimination. The first form of discrimination, again known as differential treatment discrimination, occurs whenever lenders are qualified for a specific loan on a mortgage, but they are treated differently. One example of is when ethnic minority applicants get discouraged or rejected from applying for a loan after the qualifications for a caucasian family with the same qualifications are approved. The second form of mortgage discrimination, known as disparate treatment discrimination, occurs when mortgage loan applicants who apply for a new home are denied because the business can use the denial as to their form of necessity. An example of this type of discrimination is when lenders will not allow mortgages to be applied and approved because lenders set a dollar limit well below required. So if a couple is applying for a loan and makes less than required will usually be approved more likely than a gay or lesbian couple applying for the same mortgage even though both couple's credit scores are the same and limits are the same.
There can be multiple reasons why discrimination may have happened in America before, anywhere from discrimination against specific people or prejudice against certain groups. This is why the Fair Housing Act, or the FHA, was created in 1968. The Fair Housing Act was created in 1968 to ensure that those applying for mortgages or even those using places to rent will not be discriminated against for race, religion, color, or national origin. There are plenty of ways to report housing discrimination, but the primary way to do it online is to fill out the form on the Fair Housing Foundation website. Doing this will help ensure that housing discrimination can be reported and that it will not happen again in the future.
Redlining
What Is Redlining?
Similar to mortgage discrimination, redlining is the refusal (either a loan or insurance) of someone because they live in an area deemed a poor financial risk. Yet, redlining is broader than just those factors; it is more about intentionally not investing in less desirable or those with “high-risk demographics,” and there are multiple forms of redlining. Redlining typically occurs in neighborhoods with a majority of African American residents and/or Latinx residents; these forms range from:
Retail and Grocery Stores: retail and grocery stores refuse to put a store in certain locations;
Liquorlining: neighborhoods with more liquor stores compared to other neighborhoods;
Reverse Redlining: or raising of prices in neighborhoods with less competition and because of the ethnic identity of its residents;
Brick and Mortar: retail (taxicab and delivery service companies) purposefully not serving certain neighborhoods based on assumptions about business and perceived crime and not on the economics and profitability of the area;
Student Loans;
Environmental Racism: where certain neighborhoods' parks are smaller, less accessible, and of lower quality;
Health care denial and health care in general: wealth allows individuals to live in neighborhoods with cleaner air, better grocery stores, pure water, outdoor spaces, better infrastructure, etc., providing healthier living conditions.
The practice of redlining in the United States has helped create what is known as the Racial Wealth Gap between people of color and white Americans. It makes it difficult for anyone of color to get away from poverty. Redlining is also attributed to the decline of inner-city and ethnic minority enclaves and neighborhoods.
This video does a great job of explaining what Redlining is and why it matters:
