Are you caught in the redline?

by Jason Gooljar

Imagine if you were denied a mortgage or could not buy insurance because of where you lived. Imagine if this reason was kept secret from you and it was only found out when you realized that many in your neighborhood were going through the same thing. How would this make you feel? Say this was being done to residents of Scarsdale, Edgemont, Purchase, Rye, or Bedford. I’m quite sure there would be an outrage heard around the county and even the state overnight. It would probably make all the local newspapers and the local television news programs. We would all be led to our local elected officials to scream out in anger that there were private or public institutions engaging in such behavior. Outbursts of “how dare the bank not refinance the mortgage for my million dollar property?!” would be heard.

Yeah! that’s right we should be angry! No justice for Scarsdale means no peace! Purchase, united can never be defeated! White-collar workers and hedge fund investors of Bedford unite! But what if I replaced the areas of Scarsdale, Purchase, or Bedford with Harlem, downtown Yonkers, or the South Bronx? Would we all be angry then? Would we even know about it? Well here’s a fact for you; this sort of behavior has been going on in low income working-poor communities for decades and how many people are even aware of it today?

This practice for those unfamiliar with the term is called redlining. What this means in practice is that a bank or another private or public institution would draw a red circle around an area on a map where they would not invest. Most likely these areas would be filled with minorities and low income working-poor people. Throughout the decades that have passed; this practice has resulted in segregation and urban dilapidation on a grand scale. Stretching this a little you could even say that this is just another in a long line of factors as to why public schools in these areas are not up to par. In spite of all this, redlining has been fought through the Fair Housing Act of 1968 and the Community Reinvestment Act of 1977. Just walk into any branch of a bank and ask to view their CRA file. At the bank I used to work for Wachovia, it was a public file accessible to all.

Does redlining still happen today? I’ve found articles as late as 2002 that say some sort of redlining still happens. In 2002, a woman was denied a loan by Fleet Bank and M and T Bank for income purposes. Eventually, she was able to get a loan from another financial corporation, but it cost her even more in fees because of her income situation (reverse redlining or predatory lending). Also in 2002, a study was done that found that few federal housing loans reached people in low income and minority areas of Syracuse, NY. As far as redlining in the insurance industry goes, it is basically the charging of higher rates to people living in areas they consider to be a “high risk.” In sort of the same line of things; I have to disagree with my former employer’s practice at the time of doing a credit check that the applicant must pass before they can even open a checking account (not redlining but a sort of financial discrimination and not really helping struggling individuals with bad credit). There’s also the RAC Rent-A- Centers opening in poor communities and preying on the poor with their “high rent” for household furniture in their “rent-to-own” scheme (preying on the poor).

While redlining may not be as aggressive a practice as it once was it still does happen. It is a practice that communities should look out for and bring to the attention of the media when it is found. Besides redlining, there are actions like predatory lending (reverse redlining), preying on the poor, and even discrimination against the low income with or without bad credit that still goes on today. This leads me to the underlying issue behind all of this and that is perception. There is this silent bias still lurking in the background that looks disfavoringly upon those of low income. Yet it is the low income working-poor who would benefit the most from low-interest loans that could help them start small businesses, renovate run-down homes and communities, or pursue an education. It is the working poor that need checking accounts to pay their bills. The working poor also need to be able to save and invest for their future as well. What this should all lead to is there not even being a thing as the working-poor just a robust and vibrant middle class (of course the wealthy would still be there too but the goal would be to stop the growing economic gap).

To get there we need financial institutions more like Shorebank in Chicago. Founded in 1973, they are what you would term a community development bank. They focus their lending on the urban and rural areas that redlining banks would shun. Shorebank is growing and has 1.8 billion in assets. Is it any wonder that the Nobel Peace Prize winning founder of the Grameen Bank in Bangladesh, Muhammad Yunus once worked with them? Clearly, there is something to be learned here.