Reverse redlining is a 21st Century version of blockbusting. Expensive and even unaffordable loans are aggressively marketed in neighborhoods that are targeted on the assumption that the residents lack the business and financial sophistication to understand that they could shop for a better deal. The lenders that do this are fundamentally predatory lenders pushing expensive loans with assertive and sometimes deceptive marketing techniques.
Enter ECOA and FHA. Lenders involved in reverse redlining have tried to claim that their practices do not violate the Equal Credit Opportunity Act or the Fair Housing Act because they are making credit available rather than denying it. Moreover, they are making credit available to minorities.
The DOJ doesn't buy this argument. In fact, the DOJ filed an amicus brief in the reverse redlining case involving Capital City Mortgage Corp. The brief outlines the position that DOJ will take in bringing any reverse redlining case. What the brief establishes is that, in the view of DOJ, making credit available in ways that harm the borrowers is discriminatory if the creditor targets borrowers on a prohibited basis.
Copyright © 2003 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 6, 6/03
First published on 06/01/2003