Redlining is a real estate loan practice that grew to popularity years ago. The process basically denied loans to anyone who was applying to buy a house within redlines on a map. Redlines are placed around neighborhoods and areas for a variety of reasons. Depending on the reason, redlining can be illegal in today’s market.
Legal redlining includes denying loans in areas that have geological problems such as being on earthquake fault lines. Flood plains are another reason that redlining might be practiced. Other liabilities such as proximity to dangerous facilities may or may not be legal reasons to redline a property.
Racial redlining is the illegal version of the practice. In this version areas are declined are based upon crime statistics, majority race of an area, and similar attributes. Illegal redlining has reduced in popularity over recent years. There are a variety of reasons for this, let’s take a look.
One reason that property redlining has become less prevalent is the fact that it is illegal. The federal government made it illegal in 1968. You can find the laws regarding redlining and real estate loans in the Fair Housing Act. This act was designed to give everyone fair access to housing, no matter who they were.
Recent first-time homebuyer programs have also made redlining a reduced practice. One example of this is programs to help revitalize neighborhoods. These programs help to breathe life into neighborhood that have become troubled. Many of these neighborhoods are ones that were at one point in time redlined based on racial and crime statistics. More than laws, revitalization efforts have brought an end to most redlining.
In the last few years the real estate market has had its ups and downs. Because of this fluctuation in the market, it has led to a diversification of neighborhoods. Areas that used to be low-income have seen moderate- to higher-income residences appear nearby. Besides raising house prices, this has also made neighborhoods more desirable and less likely to be redlined based on illegal motivations.
Redlining might not be as straight forward as it appears. People who get denied for a home loan need to consider all of the factors involved. Many things can get you denied for a home loan. Here are just some of the factors other than redlining that are disqualifiers:
- Bad Credit
- No Credit
- Down Payment Problems
- Other Properties In The Lender’s Portfolio
It is still possible to find redlining here and there. Just like in any industry, there are always backhanded, illegal practices that can be found. If you suspect a company of illegal redlining, you should report them right away. Make sure that you take in all factors first, such as your eligibility for a loan and other faults that the property might have.
There has been evidence found of redlining in 2015 that is illustrated in a Washington Post article here. This is an example of the bad decisions made by a branch, single entity, or the occasional company that falls through the cracks.
Simply, redlining has become far less prevalent than it was in the past. Unfortunately, our society hasn’t come as far as most people have hoped. The best way that we can further eliminate redlining is to report it whenever it is encountered.
Redlining is a practice that shouldn’t be around in today’s world. Getting rid of it was the goal of the Fair Housing Act but it fell short. Combatting redlining as it appears has been left for the most part, to the individual. Stopping companies who redline relies on YOU. What do you think about redlining? Do you think the practice is still around?