Pre-New Deal, early 1920s
Milestone
People of color segregated in urban areas through racial restrictions (known as restrictive covenants). Home loans required large down payments of up to 40% and had short terms.
Racial Impact
Family of color denied access to loans and could not afford to buy a home.
New Deal Era Laws, 1933
Milestone
The Federal Housing Administration was established to regulate lending and expand access to home loans during the Great Depression. Residential security maps created by the FHA administered Home Owner Loan Corp. color-coded neighborhoods of color in red, signifying that they posed a high risk and should be excluded from mortgage lending.
Racial Impact
Family of color living in these red-coded, urban areas still could not get a mortgage to buy a house.
1944
Milestone
G.I. Bill enacted to help returning veterans access low cost loans to buy homes. But, people of color were denied access to loans because of racist practices in the mortgage lending industry.
Racial Impact
Family of color has a father returning from war. They apply for a mortgage under the G.I. Bill but are denied. In the mid 1980s, by the time most of the G.I. Bill mortgages had matured, the median net worth of white families was $39,135. In stark contrast, the median net worth of Black households was $3,397, just 9% of white holdings.
1968-1977
Milestone
Due to demands by the civil rights and social justice movements, government enacted Fair Housing Act (1968), Equal Credit Opportunity Act (1974), Home Mortgage Disclosure Act (1975) and Community Reinvestment Act (CRA) (1977) which banned racial discrimination in lending.
Racial Impact
Family finally able to secure a mortgage to buy their home.
They pay off the mortgage 30 years later.
1999
Milestone
Financial Modernization Act allowed for new arrangements between banks, securities firms, and insurance companies and facilitated the creation and promotion of subprime loans, exempt from CRA.
Racial Impact
Family’s neighborhood is flooded with non-traditional unregulated lenders that originate millions of high cost loans in communities of color across the country.
2007
Milestone
Subprime crisis.
Racial Impact
The family refinances their home in order to repair the roof. The broker sells them a high cost loan, with no explanation even though they could have qualified for a prime loan. Family cannot afford to pay their monthly mortgage payments. They are evicted and their home foreclosed.
For more on the Race & Recession report, go to arc.org/recession.
Read Seth’s blogpost on The Huffington Post