Did Banks Engage in Reverse-Redlining While Inflating the Housing Bubble?

A lawsuit filed this week against Morgan Stanley claims that the predatory lending practices that grew the housing bubble violated federal civil rights laws, an ironic echo of a time when housing policies prevented blacks from obtaining mortgages.

1 minute read

October 18, 2012, 6:00 AM PDT

By Erica Gutiérrez


This Monday in New York, the ACLU and the National Consumer Law Center filed a 70-page lawsuit against Morgan Stanley, for its role in pushing other banks to issue large volumes of high-risk loans during the housing crisis. As a result, contends the suit, Morgan Stanley's policies effectively discriminated against blacks by targeting them for bad loans.

The lawsuit states that "black would-be homeowners were 70% more likely than white homeowners to receive a risky subprime loan from now defunct lender New Century Mortgage Company." What makes this case unique is that the plaintiff's aren't out to prove that Morgan Stanley knowingly discriminated against blacks, but rather that they were indifferent and neglectful in their policies implemented by banks such as New Century.

"What this lawsuit is saying is that these banks were adopting these policies, were profiting enormously by these policies, and they didn't care to check what impact they were having, they didn't care to check who was being hurt," says Stuart Rossman, director of litigation for the National Consumer Law Center, "What this lawsuit will hopefully establish is that they have a duty and a responsibility to do that."

Monday, October 15, 2012 in The Atlantic Cities

Large blank mall building with only two cars in large parking lot.

Pennsylvania Mall Conversion Bill Passes House

If passed, the bill would promote the adaptive reuse of defunct commercial buildings.

April 18, 2024 - Central Penn Business Journal

Street scene in Greenwich Village, New York City with people walking through busy intersection and new WTC tower in background.

Planning for Accessibility: Proximity is More Important than Mobility

Accessibility-based planning minimizes the distance that people must travel to reach desired services and activities. Measured this way, increased density can provide more total benefits than increased speeds.

April 14, 2024 - Todd Litman

Rendering of wildlife crossing over 101 freeway in Los Angeles County.

World's Largest Wildlife Overpass In the Works in Los Angeles County

Caltrans will soon close half of the 101 Freeway in order to continue construction of the Wallis Annenberg Wildlife Crossing near Agoura Hills in Los Angeles County.

April 15, 2024 - LAist

View of downtown Seattle with Space Needle and mountains in background

Eviction Looms for Low-Income Tenants as Rent Debt Rises

Nonprofit housing operators across the country face almost $10 billion in rent debt.

April 23 - The Seattle Times

Rendering of Brightline West train passing through Southern California desert

Brightline West Breaks Ground

The high-speed rail line will link Las Vegas and the Los Angeles area.

April 23 - KTLA

Aerial view of gold state capitol dome in Denver, Colorado and Denver skyline.

Colorado Bans No-Fault Evictions

In most cases, landlords must provide a just cause for evicting tenants.

April 23 - Colorado Politics

News from HUD User

HUD's Office of Policy Development and Research

Call for Speakers

Mpact Transit + Community

New Updates on PD&R Edge

HUD's Office of Policy Development and Research

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Planning for Universal Design

Learn the tools for implementing Universal Design in planning regulations.