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    Unfair & Discriminatory Bank Loans Cause Foreclosures and Blight: Cities Are Fighting Back

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UnfairBankLending.com is a website focusing on the lawsuits filed by cities and counties against major U.S. banks that have targeted minority populations and communities across America with illegal, deceptive, and high-risk mortgages and other loans that squeeze unconscionable profits from the least affluent communities in our nation.

Videos on Bank Discrimination

What is the Fair
Housing Act?

Legal expert Erwin Chemerinsky provides background and information on the Fair Housing Act and its use and effects nearly 50 years after its original passage.

How do major banks violate the Fair Housing Act?

Big bank discrimination that violates the Fair Housing Act occurs in hundreds of communities across the U.S. every day.

What are the goals of the Fair Housing Act lawsuits?

These lawsuits seek to hold major U.S. banks accountable for discrimination in lending and mortgage offerings that has led to blighted neighborhoods across the U.S.

To see more clips on unfair and discriminatory bank lending visit our video resources page.

What Is Discriminatory Lending?

Discriminatory mortgage lending represents a violation of the federal Fair Housing Act, which was enacted as part of the historic Civil Rights Statutes passed by Congress and signed into law by President Lyndon Johnson shortly after the assassination of Dr. Martin Luther King. Just last year, the Supreme Court reaffirmed that the central purpose of the Fair Housing Act is to “eradicate discriminatory practices within a sector of the Nation’s economy.” Texas Dep’t of Housing & Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507, 2511 (2015).

Discriminatory lending occurs when minority borrowers receive more expensive or higher risk loans than white borrowers and both the minority and white borrowers possess similar credit risks and financial profiles. Because minority borrowers often qualified for cheaper loans but instead received more expensive loans, they were more likely to lose their homes during foreclosure proceedings.

How Has Discriminatory Lending Affected Communities?

In addition to driving tens of thousands of homeowners into foreclosure and even bankruptcy, these discriminatory and illegal loan practices have the additional pernicious effect of eroding community tax bases, such that fire and police departments suffer drastic reductions in resources, further escalating the downward spiral of community erosion and destruction.

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Additionally, because municipalities must divert valuable resources to combat the blight caused by foreclosures, there are fewer resources available to provide essential services to all residents throughout the community. For that reason, the consequences of discriminatory lending affect all residents of the community, and not just those who received the loans. Discriminatory lending also results in non-economic injuries, such as interference with a municipalities’ longstanding interest in promoting fair housing and securing the personal, professional, and social benefits of residing in an integrated community. The United States Supreme Court has specifically explained that one of the objectives of the Fair Housing Act is to enable local governments to promote and preserve diversity in their communities. Gladstone Realtors v. Village of Bellwood, 441 U.S. 91 (1979).

Congress and the courts are not alone in addressing the devastating impact of discriminatory lending on communities. Indeed, as former Federal Reserve Bank Chairman Ben Bernanke explained, “lower-income and minority communities are often disproportionately affected by problems in the national economy, and the effects of the housing bust have followed that unfortunate pattern … Concentrations of foreclosures have been shown to do serious damage to neighborhoods and communities, reducing tax bases and leading to increased vandalism and crime. Thus, the overall effect of the foreclosure wave, especially when concentrated in lower-income and minority areas, is broader than its effects on individual homeowners.”

It should be no surprise to the banks that discriminatory lending resulted in foreclosures and damaged the local communities in which the properties were located. For example, the banks’ Annual Reports, acknowledge that they engage in extremely sophisticated risk management practices and procedures relating to mortgage lending and also possess highly detailed databases concerning borrowers and their pertinent financial and background information. This detailed data is supplemented by comprehensive reports and analysis prepared by numerous government agencies and private mortgage lending monitoring services such as Lender Processing Services and CoreLogic. And studies such as the prominent reference to the 2005 Duda report and several reports published by the US Conference of Mayors documented the negative impact that rising foreclosure rates have on minority communities.

Of course, even in the absence of any data, reports, or studies addressing discriminatory lending, the devastating impact of foreclosures was obvious to any banker who drive through the communities in which mortgage loans were issued.

Several of the largest mortgage lenders who issued discriminatory mortgage loans adversely affecting communities include Wells Fargo, Bank of America, JP Morgan, and Citigroup. To date, several municipalities have sued some or all of these banks, including Miami, Miami Gardens, Los Angeles, Oakland, Cook County, Illinois, DeKalb County (Georgia), Baltimore, and Memphis.

Images of homes foreclosed upon by major U.S. banks in the City of Miami

  • In Philadelphia, vacancy was found to be “the strongest predictor” of the risk of assault.

    (U.S. Dep't of Housing & Urban Dev. 2014 Report)

  • Foreclosed, vacant properties are “a haven for bad people doing bad things.”

    -- City of Miami Police Officer

  • “Studies show that increased rates of foreclosure lead to a corresponding rise in the total amount of violent crime in a neighborhood.”

    (Temple Political & Civil Rights Law Review, 2012)

  • “Just about every foreclosed property on my beat has some kind of problem.”

    -- City of Miami Police Officer

  • Foreclosed vacant homes are “magnets for criminal activity specifically violent crime.”

    (Lawyers' Comm. for Better Housing 2013 Report)

Video: How the City of Miami Gardens is Dealing with the Aftermath of Discriminatory Bank Conduct

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