Home Savings Named in Redlining Suit : Buyers Claim Bias Made Loan for Inner-City Property Less Favorable
San Diego County’s director of the office of contract compliance, which monitors the hiring of women and minorities, has filed a lawsuit against Home Savings of America accusing it of discriminating against him and his wife in a loan to buy a duplex in the Golden Hill-Sherman Heights area.
The lawsuit, filed Tuesday by Victor Reed and his wife, Elizabeth, alleges that Home Savings denied the couple a more favorable loan and instead insisted on stricter conditions because the property they sought to buy was in a minority neighborhood, a practice commonly known as redlining.
In addition, the Reeds’ claim that Home Savings has a policy of refusing to lend money to blacks or, when it does, requiring more stringent loan provisions.
Victor Reed, who as director of the office of contract compliance oversees the hiring of minorities and women by vendors and construction firms hired by the county, was unavailable for comment.
His attorney, Mark Kessler, said the suit is based on the belief that Home Savings has a policy of redlining in an area--defined in the lawsuit as bounded by California 94, Federal Boulevard, San Miguel Avenue, 69th Street, Imperial Avenue and Interstates 5 and 15--he described as “Southeast San Diego . . . that area of town predominantly referred to as the San Diego ghetto.”
Because of the large number of Latinos and blacks in the area, Kessler said, the Reeds were refused an 80% loan to buy a duplex at 3120 and 3122 G St. and instead had to settle for a 70% loan.
Patricia Harden, spokeswoman for Home Savings in Los Angeles, said the company had not received a copy of the suit and thus it had no comment.
According to the suit, the Reeds agreed to buy the duplex last Feb. 6 at a price of $108,000. The couple then submitted a loan application to Home Savings asking for a loan of $86,400, which amounted to 80% of the purchase price.
They claim that on Feb. 24, loan agent Ted York told them 80% loans were available, they qualified for one and would be approved for such a loan. At the time, Home Savings provided the Reeds with an estimate of settlement charges based on an 80% loan, according to the lawsuit.
But a few days later, the Reeds allege, George Shively, a Home Savings vice president and loan officer, and Don Smith, the firm’s San Diego regional manager, conducted a “drive by” appraisal of the property.
On Feb. 28, Shively told the Reeds that Home Savings would approve a loan but only to a maximum of 70% of the purchase price, or $75,600 instead of $86,400, the suit claims.
The Reeds were then faced with either accepting the new terms or losing the property, Kessler said. The couple accepted the 70% loan.
The Reeds took their redlining complaint to the San Diego City and County Reinvestment Task Force, a local-government-supported group that since 1979 has tracked lending patterns and practices of banks and savings and loans to ensure against redlining and which tries to develop methods to bring investment into deteriorating neighborhoods.
What the group has generally found is that, it’s unlikely that institutions such as Home Savings any longer have specific corporate redlining policies, but some individual loan offices or branches may still engage in the practice.
“I’m not sure anymore that it’s corporate policy anywhere not to lend money in certain areas,” said Jim Bliesner, the reinvestment consultant to the group. “I think it breaks down on the individual level. There’s a misconception about areas on the part of loan officers and appraisers. Patterns do emerge out of these individual decisions.”
Generally, Home Savings has fared well in the task force’s studies. In its last study, documenting loans through 1984, Home Savings came in 13th from the top, out of 70 banks and savings and loans analyzed. And in total dollar value of loans made in low and moderate income areas, Home Savings came in first, with loans made during the year valued at $59.5 million, representing 19% of all Home Savings’s loans that year.
In the Reeds’ case, Bliesner said, the task force talked to Home Savings officials, including Smith, who is named as a defendant in the suit. What the officials told them was that they recommended the stricter loan because of the neighborhood’s problems with crime, drugs, deteriorating properties and lack of pride in home ownership.
“There were a number of reasons why they said it doesn’t make a lot of economic sense to invest there,” Bliesner said.
Some of the reasons appeared to the task force to be legitimate considerations, Bliesner said. But others, such as the lack of pride in ownership and the property’s location, did not, enough so that the group decided to refer the complaint to the Federal Home Loan Bank Board. Officials from the board were not available for comment Wednesday.
The task force’s studies have shown that in the specific area of the Reeds’ property--Golden Hill-Sherman Heights--there exists a pattern of fewer housing loans being made there than in other areas of the city and county.
Because of that, the task force is now attempting, through the fledgling Sherman Heights Community Development Corp., to develop a long-term strategy to combat the neighborhood’s problems through construction of a community center that would offer residents various self-help programs.
Contributions totaling $2 million from the Mervyn’s Foundation and local government already have been made toward that effort, Bliesner said.
