The Federal Housing Administration (FHA)

Section 1 

Federal Housing Administration (FHA) refers to a US agency that provides mortgage insurance to FHA-approved lenders. It was a government initiative to boost the housing sector that was on a downward spiral by providing insurance to mortgage companies in cause borrowers defaulted to pay their loans. By providing mortgage insurance to lenders, this initiative created confidence in lenders since they were assured that even if a borrower defaults in the repayment of their loan, they would get compensated by FHA. As a result, the lenders gave out loans to more and more people and this led to rejuvenation of the housing sector that was on the verge of collapse. It was mainly used to help people who could not secure loans from the banks especially the black community which were considered to be high risk population in defaulting loans as captured in the statement ‘ in the 1920’s the city plan commission also drew up a map designating race restriction areas’(p.136). 

Home owners loan corporation (HOLC) was also a government initiative aimed at reviving the housing sector that was on the verge of collapse as state in the article ‘these areas were still largely undeveloped where real estate interests hoped to attract white families (p.134). This program would purchase mortgage loans from lenders in exchange for bonds of equal value. Once the corporation bought the mortgage loans from lenders, they would then refinance the borrowers who had defaulted their payment out of ‘not their own fault’ at simpler terms that enabled them to continue servicing their loans. This program improved the housing sector in that more and more people took mortgages with the assurance that would bail them out. 

Section 2 

Redlining refers to a practice that was common in the 1930’s where banks would map out areas that were likely to default on mortgages using red ink. The criteria for determining these areas was areas occupied by predominantly black population or on the reputation of the particular neighborhood. The notion was that most blacks were likely to default on loans thus making the lending institutions to suffer losses. To make sure that they were safeguarded against such losses, these areas were clearly marked in red on maps and the banks would first inquire about the area of residence of the borrower. The article ‘ Redlining's legacy: Maps are gone, but the problem hasn't disappeared’ written by CBC news provides more details about the redlining practice and making a shocking revelation that the practice was supported by the government. It further highlights that the practice was so prevalent during those days although the practice has since reduced although some banks still practice it although in a concealed manner. This article relates perfectly with what we have been learning in class about the discrimination against blacks that was taking place in the 1930’s with regards to housing. In what was referred to as race restriction areas, blacks were only allowed to stay in certain neighborhoods and were not allowed to settle in other areas since it was believed that they would lower the social status of a neighborhood. This was a form of red lining described in the article since there were boundaries that blacks were not allowed to cross. 

References 

Brooks, K. J. (2020, February 19).  Redlining's legacy: Maps are gone, but the problem hasn't disappeared . CBS News - Breaking news, 24/7 live streaming news & top stories.  https://www.cbsnews.com/news/redlining-what-is-history-mike-bloomberg-comments/