Title: The History of Lending Discrimination
Headings: The History of Lending Discrimination
The History of Lending Discrimination
Systemic racism still bolsters the racial wealth gap
Key Takeaways
What Is Lending Discrimination?
The Fair Housing Act (FHA) of 1968
Equal Credit Opportunity Act (ECOA) of 1974
Community Reinvestment Act (CRA) of 1977
What Is Redlining?
Home Owners’ Loan Corporation (HOLC)
A Tool for Discrimination
Economic and Racial Segregation From Redlining Persists
Effects of Discriminatory Lending
Corporate Redlining
The Bottom Line
Article Sources

Content: Before there were laws that expressly prohibited discrimination in lending, a practice known as “redlining” prevented minorities from accessing credit. Redlining is the discriminatory practice of denying financial services to residents of certain neighborhoods due to race or ethnicity. Sociologist John McKnight coined the term in the 1960s to describe maps that marked minority neighborhoods in red, labeling them “hazardous” to lenders. The maps were created by a federal agency, the Home Owners’ Loan Corporation (HOLC). 5 ﻿
Home Owners’ Loan Corporation (HOLC)
During the late 1930s, the HOLC—a federal agency—was created under the New Deal. The New Deal was a series of programs enacted by President Franklin Delano Roosevelt intended to help the U.S. recover from the Great Depression. The HOLC drafted “Residential Security” maps of major cities as part of its City Survey Program. To create the maps, HOLC examiners classified neighborhoods on a “perceived level of lending risk” based on information they gathered from local appraisers, bank loan officers, city officials, and real estate agents. According to the National Community Reinvestment Coalition, the examiners graded the neighborhoods based on factors such as: 6 ﻿
The age and condition of the housing
Access to transportation
The closeness of popular amenities such as parks
Proximity to undesirable properties such as polluting industries
The residents’ economic class and employment status
The residents’ ethnic and racial composition
The neighborhoods were color-coded on maps, with each color representing the area’s perceived risk to lenders.