You would think that in 2017 that discrimination and red-lining (a discriminatory practice by which banks, insurance companies and businesses limit loans, mortgages, insurance or other products with specific geographic areas, especially in inner-city neighborhoods) would be a thing of the past. Unfortunately, the battle for minority clients and their agents is as tough today as ever.
- Redlining is still widely practiced across multiple industries, even though it is illegal.
You would think that in 2017 that discrimination and redlining (a discriminatory practice by which banks, insurance companies and businesses limit loans, mortgages, insurance or other products with specific geographic areas, especially in inner-city neighborhoods) would be a thing of the past.
For the past month, I have been interviewing a cross-section of California’s leading female broker-owners as part of the California Association of Realtor’s Women’s Initiative. One of the most fascinating parts of this experience has been hearing how different things were for the older women leaders who started their careers during the 1960s and 1970s.
For example, did you know that black real estate professionals began calling themselves Realtists and founded their own trade association, the National Association of Real Estate Brokers (NAREB), in 1947? The reason — The NAR Code of Behavior prohibited blacks from becoming Realtors and barred white Realtors from selling homes in white areas to blacks.
Did you also know that prior to 1974 women could not get a credit card and, in most cases a mortgage, without a man’s signature?
A major reason that NAREB, the Asian Real Estate of America (AREAA) and the National Association of Hispanic Real Estate Brokers (NAHREB) exist is to support these agents overcoming a whole spate of problems that other agents seldom encounter, with redlining being one of the most notable.
Redlining: Homes, mortgages, cabs and even pizzas
Redlining is still widely practiced across multiple industries, even though it is illegal.
For example, two of my friends in D.C. live just a few blocks from Union Station. Even though the row homes in their area are priced at $900,000 or more, they can’t get a cab to pick them up or get a pizza delivered.
When it comes to mortgage lending, redlining is more widespread than most people realize. Here are just some of the suits (and settlements) that have been filed since Jan. 1, 2017 for violating the Fair Housing and Equal Opportunity Acts.
The court entered a consent (settlement) order in United States v. JPMorgan Chase Bank for monetary relief of $53 million, including a civil penalty of $55,000. The complaint had alleged that the defendant charged African American and Hispanic borrowers higher rates and fees for wholesale mortgages than similarly situated white borrowers.
The complaint in United States v. KleinBank filed on Jan. 13, 2017 alleged that the defendant structured its residential mortgage lending business in the Minneapolis-St. Paul area to avoid serving the credit needs in areas where the residents were predominantly minorities.
On Jan. 3, 2017, the court entered a settlement order in United States v. Union Savings Bank and Guardian Savings Bank for redlining majority-black neighborhoods, in Cincinnati, Dayton and Columbus, Ohio, as well as in Indianapolis, Indiana.
Black homeownership is down
There has been quite a bit of press about the dramatic decline in black homeownership, though Hispanic ownership has increased. When you start speaking with agents who work with minority clients, reasons for the decline become painfully obvious.
Boots on the ground
Dolores Golden, the broker owner of 1st Interstate Realtors in Culver City, California, provided me with just a few of the obstacles that she has faced in terms of closing transactions for her clients.
Triple the length of time to close an escrow
When Golden sells a property in Culver City, it can close as quickly as 30 days. If she sells a property just a few miles away in Los Angeles, it can take 90 days because of the difference in the underwriting requirements.
Ridiculous documentation requirements
One of Golden’s buyers was an elementary school teacher who was in her early 30s and was employed by the L.A. Unified School District. Even though the lender had the buyer’s pay stubs, the lender still demanded that she produce a copy of her degree and her teaching credential.
I bought my first property when I was in my 20s (and I have purchased subsequent properties since then) and have never had to produce anything more than my pay stubs from the Los Angeles Community College District, which was originally part of L.A. Unified.
Golden had a similar situation with an X-ray technician who again had pay stubs, but they required proof that he had graduated. He wouldn’t have received his state certification if he hadn’t met the requirements that include both educational documentation and passing approved state exams in his areas of certification.
Golden represented a buyer who was purchasing a non-conforming property that was on 2,500-square-foot lot. The buyer had a 3 percent down payment plus $60,000 grant toward the purchase, the equivalent of a 25.3 percent down payment.
FHA had no problem with the lot size. Nevertheless, the lender wouldn’t fund the loan unless the borrower persuaded the City of Los Angeles to issue a rebuild letter (which it did.)
That, however, didn’t satisfy the lender who wanted the city to guarantee that the property could be fully rebuilt. (The rebuild letter was only for 75 percent.) What’s absurd is that many of the new multi-story homes are being built on similar sized lots.
Golden also worked with a client who was doing a reverse purchase mortgage — that meant that she had at least 50 percent equity. When the New Jersey lender found out that the property was in Carson, they decided not to make the loan. It was a great property located in a beautiful area.
How they cope
Golden explained how they have rented buses and taken large groups of underwriters from various lenders to see the various areas they serve. Most of the underwriters had no idea how nice many of these neighborhoods are.
To help Los Angeles minority brokers to deal with these issues, the Multicultural Real Estate Alliance for Urban Change was founded back in 1992. Its goals include:
- To stop red-lining in loans and insurance.
- To increase and maintain homeownership opportunities through education, literacy programs and to rejuvenate the community.
- To prevent predatory lending practices thereby reducing foreclosures, delinquencies and evictions.
- To educate and counsel the community on how to avoid foreclosure situations.
- To increase economic development and growth in the community.
Minority brokers have fought these battles for decades. What was fascinating is that each of the brokers I spoke with shared the same “can-do” attitude: Put your head down, and work through it.
As Golden summed it up, “The lion’s changed his costume, but he’s still there.”
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/