| Mortgage markets play a critical role in making home
ownership opportunities available to low- and moderate-income households. However,
evidence suggests that artificial barriers in the market prevent some potential homeowners
from realizing the "American Dream." Several recent studies in cities throughout
the U.S. have demonstrated that racial bias and "redlining" persist in the
market for home loans. This report seeks to investigate the extent to which Oakland faces
similar circumstances, and more broadly, to determine what factors influence the decision
to approve a mortgage in the city. Along with other important findings, the results show
that racial bias does exist in Oakland, affecting black, Asian, and Hispanic applicants
with varying degrees of severity. |
This study also suggests that the widespread adoption of
credit and mortgage scoring, currently touted as a way to take human bias out of the
process, may actually serve to perpetuate discrimination rather than alleviate it.
Therefore, an alternative model of economic efficiency is presented through a case study
of one bank's success in underwriting loans in low and moderate income communities.
Combined with the results of the data analysis which indicate that using a locally based
bank increases the likelihood of loan approval, findings suggest that a competitive
advantage can be gained through an understanding of local market forces. Recommendations
for further action center on how the city can further develop local partnerships to ensure
equal opportunity for all of Oakland's residents. |
