Racial & Ethnic Disparities in Ohio Mortgage Lending

Cuyahoga County has a long history of racial segregation, mortgage redlining of African American neighborhoods, and predatory lending based on race. Cuyahoga County remains part of one of the most racially segregated regions in the United States, and people in predominantly African-American neighborhoods often cannot get mortgages to buy houses in their neighborhoods. The Fair Housing Center has published multiple reports examining local racial and ethnic disparities in mortgage lending patterns, which are available for download below.

A BRIEF HISTORY OF MORTGAGE LENDING DISCRIMINATION IN THE UNITED STATES

Racial discrimination and segregation in the mortgage lending market were put in place by two federal programs: The Home Owner’s Loan Corporation (HOLC) and the Federal Housing Administration (FHA).

HOLC was created in 1933 in response to a growing foreclosure crisis as a means to preserve homeownership in the United States. HOLC considered the racial makeup of a neighborhood to affect the values of the homes in that neighborhood, and created “residential security maps,” otherwise known as “redlining maps,” for most metropolitan areas as a tool to assess home values. Neighborhoods with or near African American communities were shaded red and excluded from the program.
The FHA was created in 1934 to insure private, amortized mortgages in order to increase home-ownership in the U.S. The FHA adopted HOLC’s practice of redlining by limiting its program to white borrowers seeking homes in white-only neighborhoods. The FHA officially endorsed racial segregation both in residential and school settings and actively discouraged banks from lending in urban areas.

Through the 30 year mortgage, HOLC and the FHA effectively created a transfer of wealth, solely to the white, working and middle classes. African Americans were cut off from the wealth creation during the 1950s and 1960s.

They did this while backing explicit racial discrimination, racial segregation, and racialized poverty as policies of the federal government, then passed these practices on to private lenders. Redlining and racial discrimination in housing continued legally until 1968, with the passage of the Fair Housing Act. However, even in the 21st century, lenders have been prosecuted by the Department of Justice for engaging in redlining.

Segregated living patterns in Cuyahoga County were, in part, created and maintained by discriminatory mortgage lending practices. Compare the redlining map from 1940 (above) to the 2016 map of where nonwhite and/or Hispanic populations live in Cleveland (below). The segregated living patterns of the Cleveland area are nearly unchanged after 76 years.