Hi! It’s Tory Haggerty from Tuscan Club University’s Fair Lending School and welcome to another Fair Lending Short. In this Fair Lender Short I want to talk about Redlining, but I want to talk about the fact that it’s not just a home loan problem.
It’s really easy to see, obviously if your organization makes home loans, and you do not make them in high minority areas, you have Redlining risk. In almost all of the cases we see in redlining are organizations that are avoiding making loans to minority borrowers in high minority areas.
But Redlining is not just a home loan problem, that’s where it’s most prevalent. Redlining can also be in any loan type. There are a lot of banks out there that make primarily commercial loans. And when we do audits at our organization, we do have banks in large metro areas that are primarily commercial lenders and we still do Redlining reviews.
We take their commercial loan portfolio and we geo-code those. Are those loans being made in high minority areas? We want to know if they are avoiding lending in all cases in high minority areas. You can do the same thing with your consumer loans. If you are avoiding making loans in high minority areas regardless of the loan type, you could have Redlining risk. So if you are a bank or credit union out there, that maybe primarily is not making a lot of home loans and you’re starting to think, hey I don’t have fair lending risk, that’s simply not true.
You should be geo-coding all of your loans to find out where you’re truly lending. Now if you’re under the CRA and a large bank reporter, you have a lot of that data and that can streamline that process for you. And there’s software available that can also help you with that process. Don’t think Redlining is just a home loan problem, it can happen with any loan product.
Thanks for reading!