Kevin J. Taylor
BUS670: Legal Environment
Dr. David MacKusick
July 13, 2013
This paper delves into the condition of mortgage discrimination and redlining. The American Dream for most Americans is to successful navigate the mortgage process and obtain a mortgage loan. Mortgage discrimination and redlining provide a hurdle to realizing that dream. Mortgage discrimination is a barrier to the consumer receiving a mortgage loan. Redlining is an obstacle to mortgage lending is high-risk neighborhoods. Durr observed that some “city leaders turned to racial covenants” (2011; p. 1176). The federal regulations that are in place to reduce mortgage discrimination include the Community Reinvestment Act, Home Mortgage Disclosure Act, and Equal Credit Opportunity Act.
Individuals and families alike aspire to achieve the American Dream of owning their own home. To that end, it is often necessary to attain a loan for the purchase price of the desired property. The process of acquiring such financing is dependent upon the consumer must subject themselves to the scrutiny of a mortgage loan department. Mortgage underwriters are tasked with certifying the consumer is a valid mortgage loan risk. Mortgage underwriters validate the application information by confirming the consumer is who they say they are, earn the income indicated, are employed where stated, and historically repay their former and current debts. The mortgage underwriters must compute the consumer’s income-to-debt ratio to ascertain the maximum amount of income the consumer can allot to repaying a mortgage debt. When the consumer selects the property of their dreams, the property is appraised to establish a reasonable purchase price, substantiate said cost is fair and satisfactory for the area, and confirm the property is habitable. If the consumer is proven a satisfactory credit risk, the mortgage underwriter approves the mortgage loan and the consumer is allowed to assume the mortgage loan to purchase the property from the buyer, reside in the property, and repay the lender the purchase price plus the agreed upon interest amount. The mortgage lending process is a daunting task. The successful consumer is the one who is equal to the task and perseveres. As stated by the late Dr. Martin Luther King, Jr. (as cited in Barnes, 2001, “the ultimate measure of a person is not where they stand in moments of comfort and convenience, but where they stand in times of challenge and controversy”. Effects on the Neighborhood
Lending may appear straight forward or black and white but it is not without its negativity. As with many other endeavors, it falls and has fallen victim to discriminatory practices. Much of the discrimination revolves around racial equality and redlining. One race determining their neighborhood should be devoid of any other races or of a particular race. Not only determining but also having the social and business wherewithal to ensure it becomes a reality. Manuel B. Aalbers (2007) affirmed that “redlining is the process of not granting mortgage loan applications from specific neighborhoods” (2007;p. 178). The original intent of redlining was to not racially motivated (Holmes, A.; 2000). Through redlining, neighborhoods were able to retain their separate but equal façade. Redlining discriminated based on where the neighborhood was. Mortgage lenders utilized lines of demarcation to maintain segregation. M B. Aalbers (2007) showed redlining as “the interaction between low income, unemployment, or ethnicity on the one hand, and the average value of sold units on the other hand” (2007, p. 177). Although the Supreme Court Civil Rights Cases of 1883 deterred public segregation, neighborhoods employed the use of racial covenants as a means to discriminate (Durr, 2011). Several laws in concert with Supreme Court rulings were enacted to combat discrimination, such...
References: Aalbers, M. B. (2007). What types of neighbourhoods are redlined? Journal of Housing and the Built Environment, 22(2), 177-198. doi:http://dx.doi.org/10.1007/s10901-007-9074-9
Barnes, T. R. (2001). The ultimate measure: Legal access for all. Vital Speeches of the Day, 67(13), 401-404. Retrieved from http://search.proquest.com/docview/221455009?accountid=32521
Brook, Y. (2008, July 18). The government did it. Forbes, Retrieved from http://www.forbes.com/2008/07/18/fannie-freddie-regulation-oped-cx_yb_0718brook.html
Durr, K. D. (2011). Not in my neighborhood: How bigotry shaped a great american city. The Journal of American History, 97(4), 1176. Retrieved from http://search.proquest.com/docview/897972120?accountid=32521
Ezeala-harrison, F., Glover, G
Holmes, A. (2000). Neighborhood racial composition and mortgage redlining: A nationwide analysis. Journal of Real Estate Portfolio Management, 6(1), 37-51. Retrieved from http://search.proquest.com/docview/197885183?accountid=32521
Seaquist, G. (2012). Business law for managers. San Diego, CA: Bridgepoint Education, Inc.
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