From Redlining Risk to Growth Opportunity: Key Takeaways from Our Roundtable

Full webinar now available on demand!

On September 19, our CEO Laird Nossuli moderated a panel of industry experts as they discussed the importance of multicultural lending strategies—not just for mitigating risk, but for driving business growth.

Access the full redlining roundtable webinar on demand.

Here are key takeaways from the discussion:

1. Redlining can be unintentional—and costly.

Historically, redlining involved marking neighborhoods that financial institutions refused to serve, disproportionately affecting people of color. Today, unintentional redlining can occur when traditional processes fail to address the needs of all community segments. Banks, credit unions, independent mortgage banks, and even mortgage insurers have faced legal action.

Olivia Kelman of Mitchell Sandler PLLC shared that since 2021, the Department of Justice (DOJ) has settled 13 redlining cases, securing $137 million in community relief through consent orders. With more than two dozen active investigations, the DOJ will continue pursuing these cases. To avoid penalties, lenders must ensure they serve their entire community.

2. Multicultural lending is critical for growth.

Redlining stifles community investment, leading to economic stagnation. Reinvesting in underserved areas stimulates their economies and creates new business opportunities. Forecasts suggest most new households over the next decade will be formed by people of color, making multicultural lending a key growth strategy.

Tony Thompson of the National Association of Minority Mortgage Bankers (NAMMBA) highlighted a University of Wisconsin study showing the homeownership gap for racial minorities represents a $4 trillion opportunity in potential originations—even with modestly priced homes. Narrowing this gap by just 5% over 20 years could generate $200 billion in revenue.

3. Complex problems require collaborative solutions.

Latonia Donaldson of PrimeLending and Nikki Bialka of Fifth Third Bank emphasized that understanding the unique needs of each community is essential to driving change and promoting growth. Collaboration is equally important.

Each community has distinct needs that can reveal key opportunities for product development, as noted by Geoff Cooper of MGIC. Lenders should consider questions such as:

• What is the rent vs. homeownership ratio?
• Is student debt a major challenge?
• Is there a need for financial education, and are materials available in the appropriate languages?
• Should alternative credit score models be explored for credit-invisible populations?
• Are there cultural factors influencing homeownership?

To bridge the homeownership gap, lenders must collaborate with community leaders, attend local government meetings, and engage with organizations like NAMMBA, the Mortgage Bankers Association (MBA) and its CONVERGENCE initiatives, and the Homeownership Council of America.

The legacy of redlining has left many communities struggling with chronic disinvestment, limiting access to financial services essential for long-term stability. By adopting a targeted, collaborative approach, lenders can not only foster business growth but also uplift the communities they serve.

Additional Resources

Recommended reading: 

• The Color of Law, by Richard Rothstein
• The Color of Money, by Mehrsa Baradaran
• Just Action, by Leah Rothstein and Richard Rothstein

Organizations for housing equity:

• NAMMBA
• MBA’s Convergence
• DIVERSIFi