Signs of the discriminatory lending practice called redlining have reemerged in metro Atlanta, according to a new analysis of home sale prices.
Georgia Tech Professor Dan Immergluck reached this conclusion in his study that determines the extent of the uneven recovery of home prices in metro Atlanta.
Immergluck said the report shows the need for regulators to refocus on fair lending. Risk-averse lenders have gone so far in restricting loans that entire sections of metro Atlanta are essentially off limits to groups of home shoppers who traditionally bought in those neighborhoods.
“Lenders have gone too far because they don’t feel pressure from the fair lending side,” Immergluck said. “Lenders will say that if a loan goes bad, they’re required to compensate [the federal government] for the loan.
“Yeah, if you make a bad loan, you still have to make it good,” he said. “But you still have to make loans.”
Redlining got its name from the practice of drawing red circles around geographic areas, often predominately minority, inside of which lenders would not make loans. The Atlanta Journal-Constitution was awarded a Pulitzer Prize for Investigative Reporting in 1989 for detailing the practice in metro Atlanta, in a series titled, “The Color of Money,” which led to significant reforms in those policies.
Much of Immergluck’s report quantifies the uneven rebound of housing prices in metro Atlanta. It’s part of his research into issues including housing and real estate markets, mortgage finance, and fair lending. His most recent book was reissued in 2011: “Foreclosed: High-Risk Lending, Deregulation, and the Undermining of America’s Mortgage Market.”
The greatest rebound of home prices in metro Atlanta has occurred in communities that are predominately white and comparatively affluent, according to the report.
“There are places that recovered, but they tend to be affluent and they don’t depend on mortgage markets,” Immergluck said. “But mortgage markets for $800,000 and above have always worked, and will always work, fine – regardless of regulations.”
This finding contradicts the presumption that the recovery of values would be shared across the region.
“Prices should have come back more evenly,” Immergluck said. “The demographics of the city are not that different from 2001. We shouldn’t have half as many mortgages [in some demographics] as we did then. That’s what is keeping the prices down in these neighborhoods.
“I think we have a new kind of era of a reemergence of redlining that’s supported, or justified, by concerns over credit quality – just like redlining was in the 1970s,” Immergluck said.
Immergluck said he used 2001 as the benchmark because the mortgage market was fairly healthy. Additionally, the trend of using home equity as a source of ready cash had not proliferated.
In addition to determining the uneven nature of price recovery, the report confirmed that the greatest collapse in home prices occurred in predominately non-white areas – especially in some communities where speculators bought homes and flipped them for significant profits. Mortgage fraud was rampant in some of these areas.
Immergluck concludes the report with data that shows minorities trail whites in the recovery of their ability to get a home loan.
That is to say, as credit standards have tightened since the great recession, a greater proportion of whites than non-whites are able to qualify for a mortgage.
This section of the study compares two years, 2012 and 2001, and concludes that lending rates have recovered at greater rates for whites than for non-whites.
The figures follow and are sourced to Home Mortgage Disclosure Act data for Atlanta Metropolitan Area:
The consequence of this lending pattern is a vicious cycle in which lenders won’t provide loans in certain neighborhoods.
Without loans, houses can’t be sold.
Without sales to drive up home prices, prices will languish because there aren’t comparable sales that lenders consider as a factor in their decision to provide a loan.
“It’s data-based redlining that shuts off credit almost completely to some parts of town,” Immergluck said. “It makes the market not work right.”
