By Cedric Ricks, Communications Associate, National Fair Housing Alliance
Nearly 46 years ago, Dr. Martin Luther King Jr. led a 1966 summer march in Chicago's Marquette Park demanding fair housing. King protested a dual housing market, in which whites were free to reside wherever they could afford, but African-Americans were barred from many parts of Chicago and in other American cities because of restrictive covenants, social practice and discrimination in lending.
Before he left Chicago, King referred to the historic protest as "a first-step in a 1,000-mile journey." Since then real progress has been made with the passage of the federal Fair Housing Act of 1968 - passed one week after King's assassination - and the enactment of the Equal Credit Opportunity Act of 1974.
But to achieve a broad affirmative vision of fair housing many additional steps are still needed. It's entirely fitting we consider what comes next as our nation honors Dr. King's birthday with a federal holiday.
Congress took an important step forward toward equality and justice with the creation of the Consumer Financial Protection Bureau, and President Obama advanced even further this month by appointing former Ohio Attorney General Richard Cordray to lead the Bureau.
The CFPB has one central mission: to make the market for consumer financial products and services work for ALL consumers, responsible providers and the economy as a whole. To accomplish its mission, the Bureau seeks to promote transparency and consumer choice while preventing unfair, deceptive and discriminatory practices.
Among other laws, the CFPB is now responsible for rulemaking, supervision and enforcement of many federal laws including the Home Mortgage Disclosure Act (HMDA), the Truth in Lending Act and the Equal Credit Opportunity Act (ECOA).
The work of the CFPB has tremendous fair lending and mortgage lending implications. The Bureau opened its doors in July and will now have all of its regulatory powers with a permanent director at the helm.
The Office of Fair Lending and Equal Opportunity coordinates all of the Bureau's fair lending responsibilities. For example, the office:
- reviews lending policies and brings enforcement actions to stop discriminatory practices;
- partners with private industry, fair lending advocates and civil rights, consumer and community groups to promote fair lending compliance and education;
- ensures that consumers have the tools they need to make sound financial decisions;
- assists in reviewing consumer complaints of unlawful discrimination;
- conducts research and analysis on equitable access to credit; and
- works with other federal government agencies such as HUD, the Department Justice and the FTC to make sure fair lending enforcement efforts are consistent, efficient and effective.
Access to sound, safe and fair financial products is vital for millions of Americans hoping to achieve the promise of fair housing.
Some have wondered whether the CFPB's existence is truly necessary. But it's crucial in light of the nation's housing crisis. Since 2007 more than 8.9 million homes have been lost to foreclosure, according to RealtyTrac. African-Americans and Latinos are more than twice as likely as whites to lose their homes to foreclosure or to be seriously delinquent on their mortgage.
These high foreclosure rates are more a function of risky features of home loans that were made than any characteristics of the borrower. Lenders offered questionable products such as "teaser" rates that balloon to higher rates after a few years, offered loans without proof of income and negatively amortizing payments so a loan's balance could grow over time.
Reliance on mortgage brokers and private securitization spurred lenders to aggressively market these loans originated by brokers, who without a vested interest did not concern themselves with a borrower's ability to repay them. Many of these risky loans were marketed to communities of color which have been underserved by the financial industry.
African-Americans and Latinos with good credit – FICO scores of over 660 – received a high interest rate loan more than three times as often as whites with similar scores, according to the Center for Responsible Lending. Communities of color were also about 30 percent more likely to receive the highest-cost subprime loans compared to similar subprime loans for white borrowers, the Center reported.
Housing, like education and health care, is a cornerstone of our society because without it we cannot build vibrant diverse communities for all Americans. There is simply no question the CFPB must play a role to restore faith in our financial system and help stabilize our current housing market.
To do any less would slow progress along Dr. King's 1,000-mile journey for a fair and just society.