By Steve Sailer
09/02/2014
From the NYT:
New York Accuses Evans Bank of Redlining By JESSICA SILVER-GREENBERG SEPTEMBER 2, 2014A half dozen years after the collapse, and basically nobody except you and me grasps how central the sacred concept of Diversity, in all its manifold meanings and opportunities for scamming, was to the mortgage meltdown. (Here are a half dozen postings I did in 2013 on recent academic studies of the role of diversity in the housing bubble.)… The case, accusing Evans Bank of violating the Fair Housing Act — a federal law intended to ensure equal access to credit — is a harbinger of other lawsuits that could be brought against some of the nation’s largest banks, several people briefed on the investigations said.
In the suit, filed in state court, prosecutors outlined how, since 2009, Evans Bancorp has created a map that defined the “trade area,” places in the Buffalo metropolitan region where the bank would make mortgages and other loans. The bank, prosecutors contend, deliberately excised much of Buffalo’s East Side.
Rival banks, the authorities said, lent to neighborhoods on the East Side at a far higher rate than Evans Bank, suggesting that the lending patterns did not stem from a dearth of willing minority borrowers….
The suit offers a detailed look at the uneasy state of lending in the United States. In the heady days before the 2008 financial crisis, as Wall Street’s mortgage machine hummed, the nation’s largest banks made loans in black and Hispanic neighborhoods, although often at steep rates.
Since then, though, the authorities nationwide have grown concerned that the pendulum has swung too far in the opposite direction, creating a patchy credit drought as banks refuse to lend in those same minority communities where credit once flowed.You can’t have a foreclosure without a default first. So, in other words, the default disaster was disproportionately the result of excessive lending to black and Hispanic communities. Carolina Reid of the San Francisco Federal Reserve estimates that across the top 50 metro markets, Hispanics were foreclosed upon at 3 times the white rate. And Hispanics were disproportionately represented in the expensive Sand States of California, Arizona, Nevada, and Florida that triggered the landslide.That unequal access to credit, the authorities say, threatens to exacerbate the country’s yawning wealth gap. Part of the problem is that the foreclosure crisis disproportionately affected black and Hispanic communities, wiping out billions of dollars of housing wealth, federal mortgage data shows.
Mortgage lending is critical, the authorities say, to bolster homeownership — a cornerstone of upward mobility — in minority communities still trying to dig out from the recession. Denied access to credit, state and federal authorities warn, minority communities are helpless to address problems like boarded-up homes, foreclosures and blight that have long ravaged neighborhoods.It’s fascinating how The Narrative is largely immune to learning anything.Pointing to the damage wrought, in part, by such problems, the City of Providence, R.I., sued Santander Bank in May, accusing it of systematically refusing to lend in predominantly minority neighborhoods. From 2009 to 2012, the lawsuit said, new mortgages in Providence’s white neighborhoods proliferated while those in minority neighborhoods plummeted by 63 percent a year from the number of new mortgages made in 2006 and 2007.
“It’s a civil rights issue,” said John P. Relman, the lead lawyer in the suit against Santander. …
Providence is not alone. The city’s lawsuit is one of many cases that have been filed against banks in the aftermath of the financial crisis. The Los Angeles city attorney, Mike Feuer, sued JPMorgan Chase in May, accusing it of both reverse redlining — the practice of steering minority borrowers toward expensive, predatory loans — and traditional redlining.
In a kind of perverse symbiosis, the lawsuit against JPMorgan argues, one practice depends on the other. Reverse redlining comes first, making it difficult for minority communities to obtain loans, except at high rates. Once those loans sour, though, minority communities are left in a credit drought, the suit says.
“These foreclosures often occur when a minority borrower who previously received a predatory loan sought to refinance the loan, only to discover that JPMorgan refused to extend credit at all,” the suit says. The action against JPMorgan came on the heels of similar cases against Wells Fargo and Bank of America.
The original lawsuit against JPMorgan was dismissed, but the city is refiling.
The term “redlining” traces back to the 1930s, when the Federal Housing Administration used red ink to designate areas that the housing agency considered far too risky to receive loans. Since then, the term has come to describe how banks would draw a red line around areas they refused to lend in.
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