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Moonrise

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Erin Hunter
Erin Hunter

Erin Hunter is a renowned children's literature author, best known for her 'Warriors' series. Her works are celebrated for their rich imagination and emotional depth, captivating a wide audience. more

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“Although the federal government had been trying to persuade middle-class families to buy single-family homes for more than fourteen years, the campaign had achieved little by the time Franklin D. Roosevelt took office in 1933. Homeownership remained prohibitively expensive for working- and middle-class families: bank mortgages typically required 50 percent down, interest-only payments, and repayment in full after five to seven years, at which point the borrower would have to refinance or find another bank to issue a new mortgage with similar terms. Few urban working- and middle-class families had the financial capacity to do what was being asked. The Depression made the housing crisis even worse. Many property-owning families with mortgages couldn't make their payments and were subject to foreclosure. With most others unable to afford homes at all, the construction industry was stalled. The New Deal designed one program to support existing homeowners who couldn't make payments, and another to make first-time homeownership possible for the middle class. In 1933, to rescue households that were about to default, the administration created the Home Owners' Loan Corporation (HOLC). It purchased existing mortgages that were subject to imminent foreclosure and then issued new mortgages with repayment schedules of up to fifteen years (later extended to twenty-five years). In addition, HOLC mortgages were amortized, meaning that each month's payment included some principal as well as interest, so when the loan was paid off, the borrower would own the home. Thus, for the first time, working- and middle-class homeowners could gradually gain equity while their properties were still mortgaged. If a family with an amortized mortgage sold its home, the equity (including any appreciation) would be the family's to keep. HOLC mortgages had low interest rates, but the borrowers still were obligated to make regular payments. The HOLC, therefore, had to exercise prudence about. its borrowers' abilities to avoid default. to assess risk, the HOLC wanted to know something about the condition of the house and of surrounding houses in the neighborhood to see whether the property would likely maintain its value. The HOLC hired local real estate agents to make the appraisals on which refinancing decisions could be based. With these agents required by their national ethics code to maintain segregation, it's not surprising that in gauging risk HOLK considered the racial composition of neighborhoods. The HOLC created color-coded maps of every metropolitan area in the nation, with the safest neighborhoods colored green and the riskiest colored red. A neighborhood earned a red color if African Americans lived in it, even if it was a solid middle-class neighborhood of single-family homes. For example, in St. Louis, the white middle-class suburb of Ladue was colored green because, according to an HOLC appraiser in 1940, it had 'not a single foreigner or negro.' The similarly middle-class suburban area of Lincoln Terrace was colored red because it had 'little or no value today . . . due to the colored element now controlling the district.' Although HOLC did not always decline to rescue homeowners in neighborhoods colored red on its maps (i.e., redlined neighborhoods), the maps had a huge impact and put the federal government on record as judging that African Americans, simply because of their race, were poor risks.”

RacismDiscriminationSegregationRedlining
Book:The Color of Law: A Forgotten History of How Our Government Segregated America
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“To solve the inability of middle-class renters to purchase single-family homes for the first time, Congress and President Roosevelt created the Federal Housing Administration in 1934. The FHA insured bank mortgages that covered 80 percent of purchase prices, had terms of twenty years, and were fully amortized. To be eligible for such insurance, the FHA insisted on doing its own appraisal of the property to make certain that the loan had a low risk of default. Because the FHA's appraisal standards included a whites-only requirement, racial segregation now became an official requirement of the federal mortgage insurance program. The FHA judged that properties would probably be too risky for insurance if they were in racially mixed neighborhoods or even in white neighborhoods near black ones that might possibly integrate in the future. When a bank applied to the FHA for insurance on a prospective loan, the agency conducted a property appraisal, which was also likely performed by a local real estate agent hired by the agency. as the volume of applications increased, the agency hired its own appraisers, usually from the ranks of the private real estate agents who had previously been working as contractors for the FHA. To guide their work, the FHA provided them with an Underwriting Manual. The first, issued in 1935, gave this instruction: 'If a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally leads to instability and a reduction in values.' Appraisers were told to give higher ratings where '[p]rotection against some adverse influences is obtained,' and that '[i]mportant among adverse influences . . . are infiltration of inharmonious racial or nationality groups.' The manual concluded that '[a]ll mortgages on properties protected against [such] unfavorable influences, to the extent such protection is possible, will obtain a high rating.' The FHA discouraged banks from making any loans at all in urban neighborhoods rather than newly built suburbs; according to the Underwriting Manual, 'older properties . . . have a tendency to accelerate the rate of transition to lower class occupancy.' The FHA favored mortgages in areas where boulevards or highways served to separate African American families from whites, stating that '[n]atural or artificially established barriers will prove effective in protecting a neighborhood and the locations within it from adverse influences, . . . includ[ing] prevention of the infiltration of . . . lower class occupancy, and inharmonious racial groups.”

RacismSegregationRedliningFha
Book:The Color of Law: A Forgotten History of How Our Government Segregated America
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