Redlining in Seattle

 Jeanette Williams and Sam Smith, 1974
Jeanette Williams and Sam Smith, 1974
Item No. 170706, Seattle Municipal Archives

On April 19, 1968, three weeks after the assassination of Martin Luther King Jr., the City Council unanimously passed Ordinance 96619 "defining and prohibiting unfair housing practices in the sale and offering for sale and in the rental and offering for rent and in the financing of housing accommodations, and defining offenses and prescribing penalties, and declaring an emergency therefore." A similar ordinance had been sent to the voters in 1964 and failed by more than a two-to-one margin. The 1968 ordinance was sponsored by six of the nine Council members; the chief architect was first-term Councilmember Sam Smith, the first African American to sit on the Council. Smith had previously been a tireless advocate for open housing and fair employment while serving as the first African American member of the Washington State Legislature. Despite the open housing ordinance, however, discrimination did not end.

Banks Are Destroying Our Neighborhoods

In July 1975, the Central Seattle Community Council Federation published a report, "Redlining and Disinvestment in Central Seattle: How the Banks are Destroying our Neighborhoods." In the report, redlining was defined as "the practice by banks and other lending institutions of refusing home loans or requiring higher interest rates and larger down payments to otherwise credit worthy people because they happen to live in a certain area." A related practice, "disinvestment," was the policy of taking in savings deposits from residents of a redlined area and refusing to return the money, whether it be in the form of a home, business, or consumer loan, to the community that provided the money.  Lending institutions made the decision that certain neighborhoods were not worthy of improving because they were dying.

 redlining report
Redlining report, 1975
Document 11219, Seattle Municipal Archives

The report outlined redlining practices in the Central Area and Rainier Valley, stating that banks refused to lend money on properties that fell below a certain price, leaving homebuyers to go to a mortgage company for a loan. Mortgage companies charged more for a loan and foreclosed up to eight times more often on FHA loans than banks or savings and loan institutions. Ratios of deposits to loans in the Central branch banks was 24%, according to the report; in suburban branch banks the ratio was 97%. "Why should Central Area savings go to help the suburbs while our own neighborhoods slowly decay and die?" the report asked.

After the report was published, several representatives of lending institutions met with members of the Central Seattle Community Council Federation to discuss voluntary disclosure on how much of their deposits came from the Central Area and how much was being reinvested in the form of housing loans. The Federation planned to ask City Council to pass a mandatory disclosure ordinance.

 news clipping
Seattle Times, August 25, 1975

Mayor's Reinvestment Task Force

In response to the Federation's report, both the State and the City began to explore the allegations. The Washington State Human Rights Commission announced that hearings would begin in September regarding possible discriminatory practices among Seattle lending institutions. Mayor Uhlman (who was in the midst of a campaign for governor) and Councilmembers John Miller and Paul Kraabel announced the formation of the Reinvestment Task Force. Its creation and membership were in place by August 1975.  The task force was charged with determining the status of investment policies regarding housing and businesses in Seattle; documenting the nature and extent of problems; evaluating private and public policies in other cities, and recommending public and private actions to encourage investment policies in the best interest of local financial institutions, the City of Seattle, and individual citizens. The Mayor appointed Municipal Court Judge T. Patrick Corbett as the chair; members included three staff members from the Housing Policy Office in the Office of Policy Planning (OPP), including Darel Grothaus; individuals from various lending institutions, and nine community members from an assortment of neighborhoods.

 Judge T. Patrick Corbett
Judge T. Patrick Corbett
Post-Intelligencer Collection, Museum of History & Industry, 2000.107.41.19.01

The task force met twice weekly for six months and all meetings were open to the public. Topics of discussion included disclosure practices of lending institutions, disclosure practices in terms of government services such as capital improvement projects by census tract, and code enforcement practices by the City's Building Department.

Citizen Involvement

At a November 20, 1975, meeting of the Reinvestment Task Force, the OPP staff contended that the work objectives were too ambitious to produce a final report by January 1, 1976. Three issues were seen to be of interest and most directly related to the mandate: documentation of investment policies for housing and businesses, analysis of appraisal and underwriting standards, and programmatic solutions such as review and counseling for people whose loan applications have been rejected. The task force agreed to this re-focusing and asked for an eight-week extension.

 redlining anthem lyrics
Redlining anthem
Box 8, Folder 5, Issues Notebooks (Record Series 1801-23), Seattle Municipal Archives

The practice of redlining was also addressed by the federal government in 1975 when Congress enacted the Home Mortgage Disclosure Act, requiring specific sizes of "depository institutions" to disclose data on mortgage and home improvement loans available by census tract or sometimes by zip code. Chicago and Cleveland enacted ordinances aimed at redlining practices, and boards of inquiry were established in Los Angeles and San Francisco. The City Council and the Mayor supported a disclosure ordinance with additional requirements over the 1975 Federal Act.

At a September 29, 1976, meeting of the City Council's Planning and Urban Development Committing regarding the lender review board, Armen Stepanian led Councilmembers Sam Smith and George Benson as well as a crowd of 150 in an anthem on redlining to the tune of "Home on the Range."

 letter to mayor
Letter to mayor, 1976
Box 136, Folder 10, Wesley Uhlman Subject Files (Record Series 5287-02), Seattle Municipal Archives

Not all citizens supported the work of the task force. On January 25, 1976, a citizen writing anonymously to Mayor Uhlman argued, "If a banking private business considers a loan made to an inner city urban decay area a poor risk I think that judgment is their own business and I believe by being on guard against poor risk reassures me that my deposits of life's savings are in good hands."

In preparation for completion of its draft report, the task force held a public hearing on January 20, 1976, giving people who had experienced difficulty in obtaining loans for the purchase or rehabilitation of homes, apartment buildings, and neighborhood businesses in all neighborhoods an opportunity to give input. The hearing was televised by KCTS Channel 9.

At that hearing, Paul Schell, then Director of the Department of Community Development, spoke about the need for a change in basics at the most basic level of processing loan applications. "[A] fundamental change needs to be induced, namely one of attitude toward continuing investment in the City. This change must start with the corporate officials of our major lending institutions and be infused down to the loan officers responsible for initial processing of individual applications."

 Paul Schell and Wes Uhlman
Paul Schell and Wes Uhlman, April 25, 1975  Onum 29910_5, Seattle Municipal Archives

Rev. Samuel McKinney, pastor of Mount Zion Baptist church at 19th and Madison, also spoke. He outlined the inability of the church to get a loan from any bank in the city for the new church his parish had completed in 1975. "Maybe you don't want to hear about churches," he said, "but maybe the same things apply to housing as applies to us as well... We entered into a new building which cost $650,000 to construct and another $100,000 to equip, and it all came from poor black folks." In 1970, Mount Zion was turned down by five banks for a loan to build a new sanctuary. The church received the loan from the American Baptist Extension Corporation in Valley View, Pennsylvania. "To make a long story short," McKinney concluded, "there was more faith exhibited by a group outside the city of Seattle, 1600 people in one church, than in all the financial institutions in the city of Seattle. We received the loan of $430,000...and are paying it back now." It was "...just another attempt, we felt, on the part of white system to try to keep black and other poor folks from trying to achieve their dreams... We didn't know it was called redlining, all we did know was when we went to the bank to get a loan we couldn't get it." 

So many people came to testify that a second public hearing had to be scheduled on January 22, 1976.

A Divided Report

By February the task force had created an inventory of disinvestment problems, a complex set of issues that set the agenda for their work. The inventory included: problems with lenders, rejections occurring at the application stage of the lending process, the method of determining property values at the appraisal and underwriting stage, disclosure, rehabilitation loans and credit allocation. With respect to the City, issues included code enforcement, zoning, public services, and public works. Other problems at the county and federal level were identified.

The draft report was reviewed by several departments. Budget Director Walter Hundley submitted comments to the Mayor on April 9, 1976. He felt the report did not focus enough on reinvestment, and strayed into "philosophical questions of whether or not basic public protection housing standards should be enforced." He did not support the establishment of a Lenders Review Board, in part because he thought the costs would be excessive.

The draft report was also reviewed by Superintendent of Buildings Alfred Petty. In his review, Petty stated that the practices of lending institutions as described in the report "include the presumption that neighborhoods are governed by an innate or inevitable pattern of rise and decline. This is an organic presumption that does not recognize the buildings can be maintained and can be repaired..." He believed the 20% vacancy rate formula in the report should be reconsidered because it "perpetuates past inequities." The focus of the draft report, Petty continued, "is overly limited to those people who wish to obtain financing in order to move into a house, and too little attention has been given to the financing needs of people who want to remain in their homes... As a result, the report needs much more work in the areas of rehabilitation financing at times other than the point of sale and the impact of existing and proposed reinvestment practices on the poor." 

 signatures
Signatures of community members of Reinvestment Task Force in letter to Chairman Corbett, May 12, 1976
Box 136, Folder 11, Wesley Uhlman Subject Files (Record Series 5287-02), Seattle Municipal Archives

At a Task Force meeting on May 11, Margaret Ceis moved to delay the proceeding for two weeks so that the community members of the task force could meet separately and draft a position paper to counter the April 23 report of the lending institutions. The primary point of disagreement between the community members and the members from the banking community revolved around disclosure. The community members wanted to require banks to disclose where their deposits came from and where the loan dollars went, as well as information about loan terms and interest rates given home buyers in different geographical areas. The bankers did not agree with those suggestions. The motion to delay was voted down and the task force met without the community members. Those members, including Glover Barnes, Karen Morgan, Luther Carr, Nancy Silberg, Margaret Ceis, Dave Sucher, Charles Jones, Stuart Weiss, and Rev. James M. Young, submitted a separate report on June 3, 1976.

The lenders also wrote a final report consisting of a position paper on disclosure, final recommendations, and the lenders' nominees to the Lenders Review Board. The Task Force on Reinvestment had met for ten months, often twice a week in three- to four-hour meetings; they also spent hours in public hearings and did an immense amount of background reading. Despite the disagreement among the members on the task force, a review process for rejected loan applications moved forward.

At a national level, the Senate Committee on Banking, Housing and Urban Affairs issued a report of Fair Lending Enforcement by the four federal financial regulatory agencies - coincidentally, also on June 3, 1976. The Committee found enforcement was "generally unsatisfactory" and recommended all lenders keep records on the minority status and sex of rejected and accepted loan applicants, noting that there is "ample evidence on the public record of discrimination in mortgage lending." During the Committee's two days of hearings, Senator Biden commented, "You all know as well as I know that people out there, because of their color, don't get the same treatment as other people do when they come in for a mortgage or a loan. It's as simple as that."

 Seattle Times article
Seattle Times, October 24, 1976

A Loan Review Process

At the end of August, the Mayor announced the Seattle Residential Loan Review Process, enabling persons whose loan applications had been rejected by participating lenders to appeal before a Lenders Review Board (LRB). A voluntary agreement was made between eight lending institutions and the City, with members of the board selected from the participating institutions. The LRB would hear appeals from citizens who were denied loans.

In response to banks who suggested this effort violated anti-trust laws, Mayor Uhlman wrote to the Federal Home Loan Bank Board. Senator William Proxmire responded that it did not violate any regulations, stating, "I consider Mayor Uhlman's approach to be a model of the kind of local cooperative initiative on behalf of urban reinvestment undertaken by municipal officials in cooperation with lenders and community groups." Resolution 25309 was introduced in September 1976 to support this effort, but did not pass. Councilmembers Kraabel and Miller supported the resolution. Councilmembers Hill and Lamphere opposed it, saying that because so many lending institutions opposed the resolution, it could become a barrier to reaching agreement with all local lending institutions on a process for resolving disputes over residential loans.

 Lenders Review Board brochure
 Lenders Review Board brochure
Lenders Review Board brochure
Box 13, Folder 13, Wesley Uhlman Subject Files (Record Series 5287-02), Seattle Municipal Archives

Despite resistance from lenders, Councilmember Kraabel introduced legislation to carry out the Loan Review Process; it passed in November as Ordinance 105987. The Public Reinvestment Review Board - a citizen counterpart to the Lenders Review Board - was created in November 1976, giving citizens a place to appeal if they were dissatisfied with the decision of the Lenders Review Board. Responsibilities included handling referrals and appeals from the Lenders Review Board, as well as reviewing complaints about lending institutions regarding the financing of the purchase or improvement of real estate. Disclosure continued to be a source of disagreement; opinions on both sides of the issue can be heard at Council meetings in September and October 1976.

In December 1976, the Lenders Review Board added members who had not signed the City's agreement specifying appraisal and underwriting standards designed to prevent redlining, angering members of the Coalition on Redlining and other members of the community.  Coalition coordinator Nick Licata stated, "If the nonsigning instittuions have not taken action by January 30, 1977, the Coalition (on Redlining) requests the city withdraw its approval and recognition of the board.  The Coalition has requested that any financial institution which joins the board must agree to the August 19 agreement with the mayor which outlined fair-lending procedures." 

In early 1977, City Council heard comments on two proposed resolutions on reinvestment introduced in December 1976. Resolution 25402, based on a draft resolution submitted by the Seattle Coalition on Redlining, sought to increase participation by depositors and borrowers in savings and loan associations and mutual savings banks by electing trustees and changing annual meeting procedures with a goal of reinvestment in existing neighborhoods. Resolution 25403 hoped to encourage mortgage lending by requesting statutory and regulatory changes at the state level. Former Mayor J.D. Braman, Chairman of the Board of Shoreline Savings, wrote City Council protesting against Resolution 25402: "The proposal that savings and loan associations place on their Boards of Directors unqualified individuals, by legislative mandate, smacks of pure Socialism." Neither resolution passed. In an attempt to set an example for lending institutions, Councilmembers John Miller and Tim Hill proposed Resolution 25422,  which supported disclosure of City spending on a neighborhood or geographic basis. The resolution did not pass; arguments against it included the difficulty of correlating census tracts with city improvements and services, as well as the difficulty of breaking down the budget by geographic area.

In February 1977, Margaret Ceis criticized the Lenders Review Board for "meeting in the board rooms of banks and the downtown Chamber of Commerce where lower-income residents might not readily go" and of going into executive session so that their meetings were not public. Eddie Rye requested Review Board meetings be held at the Central Area Motivation Program (CAMP) facility, but the LRB recommended all board meetings continue to be held at the Chamber of Commerce and that the CAMP facility be considered for review meetings.  Meeting locations for the LRB continued to be a problem in 1978.  R.J. Vanek from SCOR reported to the Public Reinvestment Review Board that his encouragement of the LRB to hold public meetings had not been well received. "Consequently, when I first attended the meetings I was as welcome as a skunk at a picnic," he reported on March 2, 1978. 

Washington State's House Bill 323

In March 1977, a hearing was held in Olympia on Washington State House Bill 323, which would prohibit redlining and require financial institutions to disclose by census tract where they are making their home loans. John Teutsch, Jr., chairman of Seattle's Lenders Review Board, spoke against the bill, stating that no complaints had been filed to date.

Margaret Ceis and Nick Licata, members of the Seattle Coalition on Redlining (SCOR), criticized the Mayor for taking too long to establish the corollary Public Reinvestment Review Board (PRRB) authorized by ordinance in November 1976. In February 1977, frustrated with the wait for the PRRB, CAMP and the Central Seattle Community Federation stated they would accept complaints from those uncomfortable with the Lenders Review Board.

 Glover Barnes
Glover Barnes
Post-Intelligencer Collection, Museum of History & Industry, 2000.107.14.16.02

Uhlman did appoint members to the PRRB, but his appointees were criticized in April 1977 by Rev. Dr. William Cate, and by Rev. Timothy Nakayama, of the Church Council for Greater Seattle. Both stated that the nominees "demonstrated a great lack of knowledge and awareness of the dimensions of the problem." SCOR's Margaret Ceis also criticized City Council for the lack of racial and geographic diversity on the Review Board. The PRRB met for the first time in June 1977. Chaired by Glover Barnes, it included Stephen Cohen, Benjamin Canada, Daryl Jakobs, and Donald Rutledge. After three other committee members resigned, Luis Rivera, Margaret Birdsall, and Margaret Ceis joined the Board. The PRRB heard its first complaint in September 1977; the complainant was Mike Augigemma, and the LRB had taken no action on his complaint filed in May. Augigemma sought financing for a new home but the bank would not let him see the appraisal on his existing home; he advocated for a policy change enabling borrowers to see and review appraisals. The PRRB wrote Washington Mutual Savings Bank to say they made a recommendation in favor of the complainant. 

In June 1977, Governor Dixie Lee Ray signed House Bill 323 prohibiting redlining. (Mayor Uhlman had lost his bid for governor in September 1976.) The House had approved the measure 84 to 4 and the Senate 29 to 11. The bill made it unlawful for a financial institution to deny or vary the terms of a loan because of the neighborhood the property is in, or to use lending standards with no economic basis.

 Lenders Review Board ad
Lenders Review Board ad
Box 4, Folder 20, Office of Management and Budget Housing and Community Development Subject Files (Record Series 5015-01), Seattle Municipal Archives

The Lenders Review Board ran an ad campaign in all weekly community papers the week of February 6 1978. Although the number of cases heard in 1977 and 1978 was small, the issue of redlining and unfair practices in lending had been brought to the attention of both local and national officials. Despite the sharp disagreement between some members of the lending community and community activists, changes in lending practices were achieved. The Public Reinvestment Review Board became inactive by 1981 and was abolished. In 1978 Gary Clark, with Model Cities, wrote a memo summarizing reinvestment progress for 1975 to 1977. He began by stating, "Reinvestment work done in the City of Seattle, in particular that done by the Mayor's Reinvestment Task Force, has helped produce significant changes in attitudes, policies and law at the local, state and federal levels over the past two years." 

Listen to audio clips from selected City Council hearings on this topic.

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