The S-Curve

Overcoming a Legacy of Bias in the Housing Industry: The Discussion Continues

Andrew Davidson

In our January 19th blog entitled, A More Equitable Lending System Will Not Be Created by Accident, we described the efforts it will take to overcome not just bias in lending today, but the systemic factors that have limited access to credit in the past and have created an unjust system. 

We have received much positive feedback on this blog and our earlier blog: In the Mortgage Industry, Who Qualifies as a ‘Good’ Homeowner? However, just as a more equitable lending system will not be created by accident, or even using seemly neutral analytical techniques, a more equitable lending system will not be created by a single individual or organization. Therefore, we believe it is important to highlight recently released research and analysis that can help advance a more equitable lending system.

First, Bankrate published a piece describing some of the sources of the racial wealth gap and several ways that people of color are Combating The Racial Wealth Gap: 9 Money Moves For Individuals of Color”.  While many of the recommendations are applicable to anyone looking to engage with the financial system, they are especially important in communities that have not had full access to the financial system.

Second, the politics and sports analytics website, FiveThirtyEight, published a detailed study of the extensive residual impact of redlining, more than 50 years after the practice was banned, The Lasting Impact of Redlining.  The study presents a disturbing portrait of how the legacy of redlining has remained imbedded in the structure of homeownership in America.

Finally, bringing many of these threads together, the National Fair Housing Alliance has released a framework for developing and accessing analytical systems used for making credit determinations.  Their framework is consistent with the model development and risk management guidelines of the banking regulators and focuses on what steps are necessary during the Purpose, Process and Monitoring phases of model development and implementation.

The confluence of these and other studies and reports on improving access and fairness in the housing finance system are a welcome sign of potential progress, but are just the beginning of what will need to sustained effort to overcome a legacy of bias.