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• 1 2022-12-02T06:32:55-08:00 Redlining and Access to Financing 12 plain 2022-12-12T12:17:29-08:00      Redlining and access to financing combined to create a powerful potion of racial discriminatory impact in housing for African Americans. Redlining can be described as a process in which goods or services are made unavailable to people based on their geographic location. The Federal Housing Administration (FHA) was founded in 1934 to deal with a housing industry reeling from the impact of the Great Depression. At that time mortgage terms were very difficult to meet for most Americans. Terms were limited to 50% of a property’s market value, with insane repayment schedules spread over 3-5 years ending in a hefty, inflated payment many could not afford. The U.S. was a nation of renters- only 1 in 10 Americans owned a home. The FHA was empowered to change that reality.
  
       Due to the social climate of the United States under Jim Crow racial oppression, this new agency did not look kindly on African American citizens. Federal housing policy served as an enabler of discriminatory real estate sales, and access to lending. The FHA maintained the Residential Security Maps and Surveys which mortgage brokers and lenders used to determine eligibility. For example, in Detroit, MI the maps divided the metropolitan area into sections ranked “A” (green) to “D” (red) based on building age, condition, civic infrastructure and neighborhood vibrancy. All seemingly objective criteria for lending, right? Sadly, the most important factor of a neighborhood’s classifications was the racial homogeneity of White residents, or the existence of a “lower grade population”, which was code for minorities. Residents in “C’” and “D” rated neighborhoods were very unlikely to qualify for an FHA back mortgage. True to America’s dedication to racism, neighborhoods with even a tiny fraction of the population consisting of African Americans was rated “D” and outlined in red. Due to the national mandate of the FHA such discriminatory practices existed across the country. Even after the passing of the Civil Rights Act of 1964, and the Fair Housing Act of 1968 made racial discrimination illegal, the racist system had done its job. Prior to the Civil Rights Act of 1964 less than 1% of all mortgages in the nation were issued to African Americans. Patterns of behavior had become locked in, biases against African American’s level of risk, regardless of income, had taken hold. The die was cast. These injurious practices restricted African Americans’ full participation in the housing market and limiting their ability to accumulate wealth.
       
       The FHA has come a long way since its founding. The Fair Housing Act of 1968 and Civil Rights Act of 1964 were two important tools to help dismantle housing discrimination in America. With that said, the FHA loan process can be a barrier to a first-time, and low-to-moderate income home buyers. While FHA back loans do offer lower down payment thresholds, they also come with additional steps buyers have to complete in order to get approval. Speaking from personal experience, my family purchased our first home in July of 2022 utilizing an FHA loan. The process was almost derailed by the FHA appraisal process which frustrated us, and the seller. Luckily, we were able to successfully navigate the FHA hurdles and close on our home, but many aren't so lucky. I spoke with a local realtor Mary Giles, Director, Firelands Association of Realtors about nuances of the FHA process.