Justice Department Cracks Down On Discriminatory Lending
The United States Justice Department is cracking down on banks and mortgage brokers suspected of discriminating against minority applicants in lending. This move is the most recent in the federal government's response to the foreclosure crisis. The Obama administration has created a new unit that will focus exclusively on unfair lending practices.
While past lending discrimination cases primarily focused on "redlining" - a bank's refusal to lend to qualified borrowers in minority areas - the new push will instead center on a more recent phenomenon critics have called "reverse redlining," which is where a mortgage broker or bank systematically singes out minority neighborhoods for loans with inferior terms (like high up-front fees, high interest rates and lax underwriting practices).
Under federal civil rights laws, a lending practice is illegal if it has a disparate impact on minority borrowers, and the Obama administration is signaling that it intends to make the enforcing of fair lending laws a signature policy push in 2010.
