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redlining is the denial of goods or
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services to people of a protected class
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the term originates from lenders denying
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where the applicant's mortgage is based
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on the race or ethnicity redlining
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violates fair housing and fair lending
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laws both of which you must understand
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to pass the real estate exam hello
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everybody it's Zach here from Real
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Estate licensewizard.com and today we're
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talking about redlining let's get
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started so what is redlining well
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redlining is the practice of denying
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services to eligible applicants usually
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on the basis of their race the term
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redlining comes from when banks used to
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highlight risky investment neighborhoods
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with the color red on maps in real
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estate Prejudice mortgage lending
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companies often Redline minority
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neighborhoods this prevents marginalized
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grooves from receiving loans for new
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housing opportunities steering is the
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illegal practice of guiding someone to
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purchase or rent a home in a specific
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area or Community Based on the race
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religion color familiar status or
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disability and steering is in fact a
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form of redlining that's the the
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connection there now what is reverse
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redlining you might have heard of this
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one before well reverse redlining is
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when Banks Target these same
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neighborhoods to offer them predatory
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loans sure this means citizens in these
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communities have Home Loans but the
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terms of these loans are abusive so
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what's the history behind redlining well
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redlining began in the 1930s when
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homeowners loan corporation and federal
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Home Loan Bank board Drew red lines
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across minority communities these red
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lines indicated that these areas were
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too risky for mortgage loan Investments
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of course this was a tactic designed to
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deny housing opportunities to Black
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citizens while redlining is now illegal
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we can still see its adverse effects on
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the housing market Banks still
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discriminate against minority
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neighborhoods and have found more modern
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ways to do so one example of this is
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called digital redlining digital
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redlining refers to the use of
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technology in discriminating against
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non-white neighborhoods for example
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internet service providers May avoid
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implementing their services in
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marginalized communities as a result
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citizens in redlined regions lack access
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to high speed internet and other Digital
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Services this perpetuates racial
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inequality and keeps minorities at a
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disadvantage so what's an example of
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redlining in real estate now that we've
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defined redlining we should discuss some
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more practical examples of how it works
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in the real estate world so one example
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would be if Red's mortgage lending
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company frequently gave loans to
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residents of neighborhood a a white
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Community meanwhile Red's mortgage
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lending company avoids giving loans to
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residents of neighborhood b a black
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community if neighborhood B's residents
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are worthy creditors then red mortgage
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lending company is likely redlining an
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example of reverse redlining would be if
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Reds was giving loans to residents of
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neighborhood B but setting abusive loan
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terms the residents of neighborhood B
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lack other options they have no choice
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but to agree to these predatory lending
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agreements so I'm going to put a quick
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list of examples of abusive of loan
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terms on the screen but essentially it's
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charging higher interest rates excessive
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broker fees hidden balloon payments loan
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flipping things like that and there's
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actually more and more of these but
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those are pretty much the most common
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ones so there was a digital redlining
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lawsuit pretty recently in 2022 the
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federal government found Redfin
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Corporation guilty of digital redlining
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where did they go wrong well Redfin had
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set a minimum price for its services and
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properties the National Fair Housing
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Alliance claimed disarmed homes in
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minority neighborhoods while Redfin lost
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the settlement and had to remove the
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policy this shows that redlining is
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still an issue that impacts minorities
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everywhere so what are the effects of
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redlining well there's going to be
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multiple different uh effects on you
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know the fair housing and societal
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aspect but essentially racial
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reduced home values low home ownership
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rates higher mortgage default rates and
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increase some private mortgages so
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really no good things come from
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redlining all bad things which again is
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why it is illegal now there are some
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instances what redlining isn't
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for example if a neighborhood falls on a
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fault line or maybe a flood plain
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lenders can legally Redline that type of
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area generally speaking mortgage lenders
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cannot discriminate based on zip code
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but they can consider the following
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factors and I'm going to put this list
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on the screen so obviously the credit
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history someone's income the loan amount
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things like that so what do you need to
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know for the real estate exam well
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redlining is the denial of goods or
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services to people of a protected class
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the term originates from lenders denying
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worthy applicants mortgages based on
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their race or ethnicity know this in
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your State's Civic protected classes and
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you will be good to go come exam day for
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more on Fair Housing click the video
5:12
here and click here to subscribe thank
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you so much for watching until next time
