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Monday, December 6, 2021

New Justice Department Initiative Combats Modern-Day Redlining

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In an effort to eliminate redlining—the ongoing practice by which people of color are systematically denied access to loans and other financial investments—the Justice Department announced the Combatting Redlining Initiative last Friday.

“Our new Initiative should send a strong message to banks and lenders that we will hold them accountable as we work to combat discriminatory race and national origin-based lending practices,” said Assistant Attorney General for the Civil Rights Division of the Department of Justice in the press release.

Though the Equal Credit Opportunity Act and the Fair Housing Act outlawed the practice, redlining still exists today and has evolved to the digital age.

“Digital redlining,” the focus of the new initiative, exists in the form of the “algorithms and software banks use to decide whether to approve a loan,” according to CBS News.

The department followed up the announcement by revealing the resolution to a case involving allegations of redlining. Trustmark National Bank purportedly redlined the neighborhoods of Black and Hispanic residents of Memphis, Tennessee.

The Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Western District of Tennessee’s U.S. Attorney’s Office and the Justice Department agreed to settle the case.

As part of the agreement, Trustmark must boost credit opportunities for Black and Hispanic Memphis residents through a $3.85 million loan subsidy fund and create a loan production office in a predominately Black and Hispanic neighborhood, along with paying multiple fines and satisfying several other stipulations.

Redlining as a practice dates back to Franklin D. Roosevelt’s New Deal, a response to the economic devastation of the Great Depression. New Deal programs “offered government-insured mortgages for homeowners” in an effort to “stave off a massive wave of foreclosures,” according to The New York Times.

Over time, the program narrowed the criteria for eligibility by placing neighborhoods in a numbered tier list from “A” to “D” on maps. “A”-tier neighborhoods were considered worthwhile to invest in, and shaded with the color green.

“D”-tier neighborhoods were considered too risky for investment and shaded with the color red. Lower-ranking neighborhoods were almost always predominately Black. Residents of these “D”-tier areas were excluded from the government programs designed to help homeowners, literally boxed in by the red lines on the map.

Without access to lending programs, countless families were unable to purchase homes in neighborhoods where property value increased over time—destroying the chance at generational wealth afforded to white families.

“Those who were fortunate enough to enjoy the largess of this government were able to see benefits accrue over generations, which they could then share with their children and their grandchildren,” Rutgers University David Troutt told CBS News. “And so to be left out of that process of household wealth accumulation has been devastating for Black families.”

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