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Reverse Redlining 101 - YouTube
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[0]
ever heard of redlining what about
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reverse redlining
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the term redlining came from government
[6]
maps that color-coded neighborhoods
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based on perceived risk for home
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mortgage lending and insurance
[11]
unfortunately race national origin and
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religion played a significant role
[15]
in how the maps were drawn up and
[17]
determined for decades
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who got access to home ownership and who
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didn't
[21]
where redlining sought to preserve white
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communities by denying loans
[25]
and mortgages to those viewed as
[26]
non-white reverse redlining involves
[28]
targeting residents within certain
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geographic boundaries
[31]
often based on income race or ethnicity
[34]
and giving those targeted borrowers
[36]
credit
[36]
on unfair terms different from what
[38]
other similarly qualified people could
[40]
get
[41]
often these are predatory products built
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to fail or loaded with significantly
[45]
higher costs
[46]
and fees so what does this look like in
[49]
practice
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let's explain a defining moment in
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identifying reverse redlining was the
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heart graves
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versus capital city mortgage case in the
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1990s
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in one of washington dc's predominantly
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black neighborhoods
[62]
reverend clyde hargraves was pastor of
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greater little ark baptist church
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a majority black congregation little ark
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received an unsolicited call from a lone
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broker saying that he had heard that the
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church was experiencing
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financial difficulty and was in need of
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a loan
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the fact was little arc was equity rich
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their property was worth four hundred
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thousand dollars and was nearly paid off
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with only fourteen thousand dollars due
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on the original mortgage
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however little arc was open to getting a
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loan to pay off the rest of its debts
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about seventy thousand dollars worth the
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broker offered reverend hargraves a one
[96]
hundred sixty thousand dollar loan from
[97]
capital city mortgage
[99]
hargraves expressed discomfort with the
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size of this loan but the broker
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convinced him that the church will have
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difficulty getting a smaller loan
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the broker assured our graves that after
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a limited time the loan
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offered at 18 interest would be
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refinanced at a lower interest rate
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thereby reducing the church's three
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thousand dollar monthly payments on it
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the broker falsely told hargraves that
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the payments were for principal
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and interest and that the loan did not
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have a final balloon payment
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swayed by the broker's false
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reassurances reverend hargraves ended up
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pledging the church property to secure a
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160 thousand dollar loan from capital
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city mortgage
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the loan document that reverend harvard
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signed had many key terms left blank
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such as the interest rate monthly
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payments and duration of the loan
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capital city refused to give hard graves
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a copy of these documents
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at the closing of the loan hargraves
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discovered for the first time that the
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loan had a 26 000
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origination fee this fee covers the
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lender's administrative costs
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and usually is about one percent of the
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loan amount
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capital city's undisclosed origination
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fee was a whopping 16 percent of the
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total amount and nearly half of that
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went to the loan broker as commissioned
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horograft is only then told of a 25
[171]
interest rate
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and monthly payments of 3200 for the
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first four years of the loan
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and in the fifth and final year the
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monthly payments will escalate to four
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thousand dollars with a 30
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interest rate also although the first
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page of the loan stated that the
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payments were for principal
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and interest capital city later deemed
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the entire monthly payments would cover
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interest only
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plus there was in fact a final balloon
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payment required
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when reverend hargraves attempted to
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reach the loan broker to complain about
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the undisclosed fees
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he discovered that the broker's phone
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was disconnected
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the church tried to move forward but
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after two years of struggling under the
[206]
weight of the high loan cost
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little arc was forced into bankruptcy
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capital city then foreclosed on the
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church
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gaining a property that they could turn
[214]
around and sell a lawsuit ensued
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with the church bringing in less than
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four thousand dollars a month the
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complaint alleged that capital city knew
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or should have known that it was
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impossible for little ark to pay off the
[225]
loan
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especially including a final balloon
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payment
[229]
other plaintiffs in the action included
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homeowners who had similar problems with
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their capital city home loans
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the lawsuit argued that the defendants
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targeted and marketed to black
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communities because they believed them
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to be unsophisticated or financially
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desperate and therefore more
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susceptible to their fraudulent lending
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practices
[246]
although the case eventually settled it
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was only after many capital city
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customers had lost their homes or
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businesses this was the first case to
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define reverse redlining
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in more recent years another case arose
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saint jean versus immigrant mortgage
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company
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in new york city between 1999 and 2008
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immigrant mortgage company issued
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mortgage refinance loans under starting
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a program
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nina stood for no income no asset
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meaning that the borrowers didn't have
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to prove their income
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or assets in order to get funding this
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program was designed exclusively for
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borrowers
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who had poor credit for significant
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equity in their homes
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to qualify you had to have high equity
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in your home
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usually 50 or more and a credit score
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below 600
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for example the bank did not examine a
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bar's ability to repay the loan
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and instead lend the money solely on the
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basis of the value of the homes
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then if a borrower fell behind on even a
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single payment
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immigrant imposed an automatic 18
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default interest rate
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which continued to accrue unless the
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borrower caught up on all payments
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penalties and fees
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these unfavorable terms were buried in
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the fine print and never explained to
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the borrowers
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immigrant aggressively marketed star
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nina loans to black and hispanic
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homeowners with poor credit
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with 80 of immigrants total advertising
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spending going to newspapers in those
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communities
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and 96 of their advertisements with
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images of people
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featuring black and or hispanic
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individuals the case went to two
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separate trials in which the victims
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were awarded over 1.6 million dollars
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and damages attorney fees and costs
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but this was after many borrowers have
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been forced to sell their homes or face
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foreclosure
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homes they had once almost paid off this
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was a massive loss of equity and
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financial disaster for the plaintiffs
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their families and the neighborhoods
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immigrant targeted
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although both cases resulted in monetary
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damages for named victims
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no amount would ever make up for what
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the families went through along with the
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stress
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heartache and loss of their homes this
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is the harm
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that reverse redlining causes in black
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and brown communities
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already riddled with mass amounts of
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unfair lending
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redlining and inadequate investment
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here in indiana you might find predatory
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lenders targeting your neighborhoods in
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a variety of ways
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including but not limited to refinancing
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reverse mortgages rent to own schemes
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cash for home purchase methods and more
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the fair housing center of central
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indiana needs your help
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if you become aware of these types of
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transactions or are marketed to in this
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way
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please contact us by visiting fhcci.org
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you
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