[9] Several class action mortgage discrimination claims have been filed against lenders across the country, alleging that those lenders disproportionately targeted minorities for high cost, high risk subprime lending, which has resulted in disproportionately higher rates of default and foreclosure for minority African American and Hispanic borrowers.
[12] In 1993 President Bill Clinton made changes to the Community Reinvestment Act to make mortgages more obtainable for lower and lower-middle-class families.
In 1993 the Federal Reserve Bank of Boston issued a report entitled "Closing the Gap: A Guide to Equal Opportunity Lending".
While, "Closing the Gap" was not an industry-wide mandate, it illustrates the efforts banks made to meet public pressure to overcome mortgage discrimination.
[15] Minorities willingly entered sub-prime mortgages in far greater numbers than whites and represented a disproportional percentage of foreclosures,[16][17] Recently, the NAACP has submitted a lawsuit concerning alleged injustices in the lending industry.
's Furman Center for Real Estate and Urban Policy, illustrated stark racial differences between the New York City neighborhoods where subprime mortgages were common and those where they were rare.
The analysis showed that even when median income levels were comparable, home buyers in minority neighborhoods were more likely to get a loan from a subprime lender.
Thousands of blacks, Latinos, and poor people were systematically dislocated and prevented from acquiring loans by realtors and lending institutions with the blessings of the city's urban renewal program.
[20] A 2015 Measure of America study commissioned by the American Civil Liberties Union examined the likely effect of discriminatory lending leading up to the financial crisis on the racial wealth gap for the next generation, and found that, among families that owned homes, white households had started to rebound from the worst effects of the Great Recession while black households were still struggling to make up lost ground.
The analysis projected that the racial wealth gap will be significantly greater in the next generation because of the differential impact of the Great Recession.
[16][22][23] A lower savings rate and a distrust of banks stemming from a legacy of redlining may help explain why there are fewer branches in minority neighborhoods.
A majority of the loans were refinance transactions allowing homeowners to take cash out of their appreciating property or pay off credit card and other debt.
Section 3605, although not specifically naming foreclosures, discrimination in "the manner in which a lending institution forecloses a dlinquent or defaulted mortgage note" falls under the realm of the "terms or conditions of such loan".
The FDIC Policy Statement explained that "courts have recognized three methods of proof of lending discrimination under the ECOA and the FH Act", including: "Overt evidence of discrimination", when a lender blatantly discriminates on a prohibited basis; evidence of "disparate treatment", when a lender treats applicants differently based on one of the prohibited factors; and evidence of "disparate impact", when a lender applies a practice uniformly to all applicants but the practice has a discriminatory effect on a prohibited basis and is not justified by business necessity.