From Foreclosure to Fair Lending

Advocacy, Organizing, Occupy, and the Pursuit of Equitable Credit

Chester Hartman, Gregory D. Squires

• Publisher: New Village Press
• Year: 2013
• ISBN:
  9781613320143
• Topic: Économie
• Subtopic: Banques et services bancaires

Well-known fair housing and fair lending activists and organizers examine the implications of the new wave of fair housing activism generated by Occupy Wall Street protests and the many successes achieved in fair housing and fair lending over the years. The book reveals the limitations of advocacy efforts and the challenges that remain. Best directions for future action are brought to light by staff of fair housing organizations, fair housing attorneys, community and labor organizers, and scholars who have researched social justice organizing and advocacy movements. The book is written for general interest and academic audiences.Contributors address the foreclosure crisis, access to credit in a changing marketplace, and the immoral hazards of big banks. They examine opportunities in collective bargaining available to homeowners and how low-income and minority households were denied access to historically low home prices and interest rates. Authors question the effectiveness of litigation to uphold the Fair Housing Act's promise of nondiscriminatory home loans and ask how the Consumer Financial Protection Bureau is assuring fair lending. They also look at where immigrants stand, housing as a human right, and methods for building a movement.

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INTRODUCTION

Occupy Wall Street

A New Wave of Fair Housing Activism?

Gregory D. Squires and Chester Hartman

A rising tide lifts all boats, sinks all rafts and drowns the people treading water! —VERNELLIA R. RANDALL (2011)

FORTY YEARS AGO, Gale Cincotta, affectionately known in the community organizing world as the mother of community reinvestment, led her troops into bank lobbies, effectively shutting them down for the day, held barbeques on the front yards of bank executives, and threatened Federal Reserve Chairman Paul Volker that she would hang a “Loan Shark” sign over the Federal Reserve Board office in Washington, DC (Westgate 2011). Since that time, a fair housing/fair lending/community reinvestment infrastructure has emerged, changing the way the nation’s financial institutions and housing providers do business. With the passage of fair housing and fair lending laws, lawsuits and administrative complaints to enforce them, community reinvestment agreements, and other tactics, a tradition of redlining and disinvestment slowly evolved into a commitment to fair housing and reinvestment (Squires 2003). But has this movement run its course? And do the Occupy Wall Street protests, which are reminiscent of what Cincotta was doing in the 1970s and for several years after, portend the next wave?

Going back at least to the creation of the Federal Housing Administration (FHA) in 1934, virtually all branches of the housing industry, along with the government agencies that regulated it, practiced explicit, overt racial discrimination (Jackson 1985; Massey and Denton 1993; Meyer 2000). Early FHA underwriting manuals stated that “if a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes” (FHA 1938, par. 937). Racially restrictive covenants assured that properties in the more desirable neighborhoods would stay in white hands until the Supreme Court prohibited enforcement of such agreements in the 1948 case Shelley v. Kraemer (Gotham 2002; Satter 2009). Until 1950, the National Association of Realtors stated in its code of ethics, “a realtor should never be instrumental in introducing into a neighborhood . . . members of any race, nationality or any individuals whose presence will clearly be detrimental to property values in that neighborhood” (Judd 1984, 284). Training materials used until the 1970s by the American Institute of Real Estate Appraisers included the following example to illustrate sound neighborhood analysis: “The neighborhood is entirely Caucasian. It appears that there is no adverse effect by minority groups” (Greene 1980, 9). Public housing has long been a linchpin for racial segregation (Hirsch 1983; Polikoff 2006). Redlining by insurance companies and mortgage lenders, and, more recently, the wave of reverse redlining from predatory lending practices sealed the doom of many urban communities (Squires 1997; Immergluck 2004, 2009).

The civil rights movement eliminated virtually all the explicitly discriminatory rules of real estate agents, mortgage lenders, and other housing providers, though discriminatory practices persisted. A host of community organizations, consumer advocacy groups, fair housing agencies, sympathetic attorneys, supportive foundations, some elected officials, and others developed a range of skills (e.g., research, litigation, communication, advocacy) to change the way housing and related services were normally provided. The better-known names that have constituted this community reinvestment infrastructure include National People’s Action and National Training and Information Center (both started by Cincotta), National Fair Housing Alliance (NFHA), National Community Reinvestment Coalition (NCRC), Association of Community Organizations for Reform Now (ACORN), Center for Responsible Lending, Center for Community Change, Consumer Federation of America, and, more recently, Americans for Financial Reform.

This community reinvestment movement, consisting of a range of initiatives to increase access to financial services in traditionally underserved low-income and minority communities, has had many successes. Key federal laws include the 1968 Fair Housing Act and subsequent amendments, the Equal Credit Opportunity Act (ECOA), and the Community Reinvestment Act (CRA)—basically, a federal law prohibiting redlining. These and other statutes put the federal government and many state and local governments, which had been explicitly enforcing discriminatory rules for decades, on the side of fair housing. The CRA has generated $6 trillion in new loans in traditionally underserved communities (Community-Wealth.org, 2013). NFHA (2010) reports that since 1999, fair housing organizations have assisted in lawsuits that have generated more than $380 million for victims of housing discrimination through various enforcement activities.

In recent years, government agencies have become more active, particularly in response to the foreclosure crises confronting many families and communities. For example, Goldman Sachs Group, Inc. and the Securities and Exchange Commission (SEC) reached a $550 million settlement over charges that the firm had misled investors in a mortgage-backed investment. Agreements were reached with JPMorgan Chase & Co. ($269.9 million) and Credit Suisse Group AG ($120 million) for similar practices. The Bank of America Corporation, which bought Countrywide Financial in 2008, reached a $335 million settlement with the Department of Justice (DOJ) in response to Countrywide’s practice of steering black and Hispanic borrowers to subprime loans while giving better terms to similarly qualified white borrowers (“On the Trail of Mortgage Fraud” 2012; Silver-Greenberg 2012). DOJ also reached a $175 million settlement with Wells Fargo & Company that set aside $125 million in compensation to African American and Hispanic borrowers who were steered to subprime mortgages or charged higher fees and rates than comparable white borrowers and $50 million for down payment assistance to borrowers in communities where the DOJ identified large numbers of discrimination victims (DOJ 2012b). There have been several other settlements involving Citibank, Barclays, and other lenders. But in some cases, judges have stepped in and blocked the settlements, criticizing the enforcement agency for accepting too weak of a deal (New 2011).

More significantly, the DOJ and Department of Housing and Urban Development (HUD), along with forty-nine state attorneys general, announced a $25 billion agreement with five of the nation’s largest mortgage servicers (Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc.). The settlement involves payment of $20 million to mortgage borrowers and $5 million to federal and state agencies in response to past abuses in the servicing of borrowers, including robo-signing, improper documentation, and lost paperwork. President Obama also appointed a Residential Mortgage-Backed Securities Working Group to investigate wrongful securitization and other fraudulent mortgage-related practices (DOJ 2012a). But it is generally recognized that all of these initiatives are not sufficient to address the wide range of illegal activities and other challenges posed by the financial crisis, as well as related fair housing and fair lending barriers. Tom Perez (2012), assistant attorney general for civil rights, acknowledged in the spring of 2012 that while his office has accomplished a lot, there is a lot more to do. More bluntly, former bank regulator William K. Black, who teaches economics and law at the University of Missouri, dismissed recent federal actions by asserting, “Prosecutors can’t argue that these cases will serve as a deterrence when there are no criminal indictments of senior executives” (Douglas 2012).

For example, NFHA (2012, 5, 6) has estimated that there are approximately four million incidents of housing discrimination that occur each year, but just over twenty-seven thousand complaints were filed with fair housing enforcement agencies in 2011. When subprime lending peaked in 2006, 53.7 percent of blacks, 46.6 percent of Hispanics, and just 17.7 percent of whites received high-priced loans. In minority neighborhoods, 46.6 percent received such loans compared to 21.7 percent of borrowers in white areas. These gaps did not close when various credit and financial characteristics of borrowers were taken into consideration (Avery, Brevoort, and Canner 2007). Not surprisingly, the foreclosures that followed reflected these racial disparities. Among borrowers who received loans between 2004 and 2008, 11 percent of African Americans and 14 percent of Hispanics have lost their homes compared to 8 percent of Asians and 6 percent of non-Hispanic whites (Bocian et al. 2012, 39). While levels of segregation have been reduced modestly since the 1970s, black/white segregation in large cities where the black population is highly concentrated (e.g., New York City, Chicago, Detroit, Cleveland, Milwaukee) persists and still amounts to what Douglas Massey and Nancy Denton (1993) refer to as hypersegregation in their classic book American Apartheid. To illustrate, in 2010, the typical white resident lived in a neighborhood that was 75 percent white compared to 35 percent for the typical black resident—approximately the same share of white neighbors that black families had in 1940. At the same time, Hispanic and Asian segregation has not been reduced (Logan and Stults 2011). Noting the persistence of housing discrimination despite increased enforcement efforts, Robert Schwemm, one of the nation’s leading fair housing legal scholars, asserted, “something new must be tried” (2007, 464, emphasis in original).

In describing the success of community reinvestment organizing efforts, Peter Dreier (2003, 344), former director of housing for the Boston Redevelopment Authority and currently a sociologist at Occidental College, referred to CRA-related initiatives as “the most successful example of grassroots community organizing since the mid-1970s.” But he also noted that “this is sort of like being the tallest building in Topeka; there’s not much competition.” He went on to describe challenges that confront this movement, including the increasing concentration and power of the financial services industry. If the community reinvestment movement is to build on its success in the latter decades of the twentieth century and meet emerging twenty-first century challenges, he argued that fair housing and fair lending groups will have to form stronger coalitions with labor unions, environmental groups, progressive elected officials, and others who are struggling with their own versions of uneven and inequitable development. Here is where Oc...