Redlining
Candlefocus EditorThe term redlining originates from when maps were drawn to illustrate various neighborhoods divides by banks and insurance companies in the early 20th century. Red lines were drawn to show which areas in cities did not receive housing loans or insurance. This was most often based on the racial and ethnic minorities living in these neighborhoods.
The results of this practice are still present today. Minority communities are more likely to be denied access to traditional banking products and services such as credit, loans and mortgages. This has led to a decreased ability to build wealth and homeownership levels in these communities.
Despite the long-standing history of redlining, today banks and other financial institutions are prohibited from judging an applicant’s financial worthiness solely on the basis of race or ethnicity per the Fair Lending Act of 1968.
The effects of redlining have been far-reaching, but steps have been taken in recent years to decrease the prevalence of redlining and promote real estate opportunities for minority populations. The Community Reinvestment Act of 1977 encourages regulated financial institutions to lend in low and moderate-income communities. Additionally, the U.S Department of Housing and Urban Development sets up outreach programs to educate residents of redlined areas on their right to access financial services without being discriminated against.
Redlining is an illegal practice, but unfortunately, its effects are still present today. Although, steps are being taken to reduce and combat the effects of redlining, more must be done in order to ensure equal access to financial products and services.