A History of Bias: How the Justice Department’s Case Against Rocket Mortgage Highlights America’s Legacy of Racial Discrimination in Housing

The Justice Department's recent lawsuit against Rocket Mortgage, appraisers, and others highlights an ongoing, deeply rooted issue: racial discrimination in housing and mortgage lending. This legal action follows allegations that these parties engaged in systemic practices disadvantaging Black Americans by undervaluing properties in predominantly Black neighborhoods, effectively locking homeowners and aspiring buyers into cycles of economic disadvantage. Such practices not only block the potential for wealth building but reinforce disparities that date back generations.

Historically, discriminatory practices have plagued Black Americans' efforts to gain equal footing in housing. Here are three pivotal examples that highlight this persistent trend:

Redlining and the Federal Housing Administration (FHA)

In the 1930s, the FHA institutionalized redlining, a practice where banks denied loans or limited financial services in neighborhoods predominantly occupied by Black Americans. Neighborhoods were coded by risk, with those home to people of color often marked as "high risk" or "undesirable" for investment. This government-backed discrimination blocked Black families from obtaining home loans and mortgages, forcing them into exploitative housing contracts or substandard living conditions. Redlining’s effects have been so long-lasting that communities are still experiencing lower property values and reduced access to credit today, setting a precedent for continued inequality in lending.

The GI Bill Exclusion

After World War II, the GI Bill provided returning soldiers with benefits for homeownership, education, and more. While Black veterans were eligible for these benefits in theory, in practice, they faced barriers due to local implementation of the law. Banks frequently refused to grant mortgages to Black veterans, especially in areas where they might buy homes outside predominantly Black neighborhoods. As a result, many Black veterans were excluded from homeownership and the economic security it offered, missing out on one of the most significant opportunities for wealth-building afforded to their white counterparts.

Predatory Lending in the 2000s

Leading up to the 2008 financial crisis, lenders targeted Black communities with subprime loans—high-interest mortgages with onerous terms, even for individuals with qualifying credit scores for prime loans. These loans increased the likelihood of foreclosure, disproportionately affecting Black families and stripping generational wealth in a matter of years. The subprime crisis is a recent reminder of how lending discrimination evolves but remains present, as certain communities are systematically placed at higher financial risk.

The Justice Department’s lawsuit against Rocket Mortgage is a reminder that while discriminatory practices have evolved, they remain fundamentally linked to the country’s history of systemic racism. If left unchecked, these patterns will continue to hinder economic progress for Black Americans, perpetuating the inequality embedded within America’s financial and housing systems.

For more information on these historical cases and their lingering impact, consider sources like Ta-Nehisi Coates’ essay, The Case for Reparations, which delves into the legacy of redlining; the book When Affirmative Action Was White by Ira Katznelson, exploring exclusions from the GI Bill; and academic studies on the subprime mortgage crisis and its racial dimensions. Together, these underscore that addressing discrimination requires ongoing vigilance and accountability within America's financial institutions.

Sources:

Redlining and the Federal Housing Administration (FHA)

Rothstein, Richard. The Color of Law: A Forgotten History of How Our Government Segregated America. Liveright, 2017.

This book provides a detailed analysis of how redlining and other government-backed policies enforced residential segregation.

Coates, Ta-Nehisi. "The Case for Reparations." The Atlantic, June 2014.

Coates’ essay highlights the legacy of redlining and its impact on Black homeownership and wealth.

The GI Bill Exclusion

Katznelson, Ira. When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America. W.W. Norton & Company, 2005.Katznelson’s book explains how Black veterans were systematically excluded from the GI Bill’s benefits.

Onkst, David H. "‘First a Negro … Incidentally a Veteran’: Black World War Two Veterans and the G.I. Bill in the Deep South, 1944–1948." Journal of Social History, vol. 31, no. 3, 1998, pp. 517-543.

This article provides further context on the discrimination Black veterans faced in accessing GI Bill benefits.

Predatory Lending and the 2008 Financial Crisis

Rugh, Jacob S., and Douglas S. Massey. "Racial Segregation and the American Foreclosure Crisis." American Sociological Review, vol. 75, no. 5, 2010, pp. 629-651.

This study examines how discriminatory lending led to a disproportionate number of foreclosures in Black neighborhoods.

Taylor, Keeanga-Yamahtta. Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership. University of North Carolina Press, 2019.

Taylor’s book offers an analysis of the predatory lending practices that led to the foreclosure crisis, particularly in Black communities.

These sources provide critical historical context and insights into how discriminatory practices have persisted and evolved in American housing and lending.