Is there really still racial discrimination in….?
So today I was at a meeting in a place where smart people work and a coworker of mine got the question, “so you’re saying that racial discrimination still exists in mortgage lending?”
The questioner is undoubtedly very smart, you don’t have their job without a significant level of intellect, yet the question reveals an extraordinary lack of attention to some very real social issues. This shouldn't come as a surprise, in the lending and financial community it sometime is comforting to look at the disclosures and the colorblind automation and feel that there is no way that overt discrimination could survive in such an environment.
This is only the case if we assume that there is no difference between minority and non-minority poverty, or that black poverty is a “close cousin” of white poverty. This couldn't be further from the case. First and foremost, there is no segregation at work in white poverty. While some neighborhoods tend to be wealthier than others, it is not uncommon to see lower, middle, and upper income whites living in clusters that are statistically distinct from more diverse areas when viewed spatially. For many reasons this trend is rarely seen in black housing patterns. Modern segregation has its roots in overtly discriminatory housing policy, yet there are intense social and cultural reasons that it continues as well. This leads to spatial divisions that discourage lenders from seeking ways to market to minority neighborhoods. Without substantial lending, these areas see lower home values that white neighborhoods of similar income profiles, which leads to even less interest on the part of loan originators and Realtors, who are typically white anyway. Realtors feel that marketing to minority neighborhoods is a waste of their time, and loan originators see them as additional work that they could better employ working on larger loans with better commissions.
So is this discrimination? Well yes, but it is discrimination rooted in a history of racism and the implicit bias created by long term segregation. While we have created a housing system that maximizes home values and incents lenders and real estate professionals by tying their incomes to the value of the property or the loan, we have also guaranteed that the segregation rooted in racism, slavery, and Jim Crowe would be baked in to our modern housing system as well. While this works out well for homeowners in white neighborhoods it contributes to the inability of those living in segregated communities from building wealth.
So is this discrimination?
You tell me.