Underwriting Manual, excerpt
Date: 1938
Caption: The Federal Housing Administration published guidelines to help determine which properties, neighborhoods, and people could receive federally insured mortgages.
As part of the New Deal, President Franklin Delano Roosevelt signed the National Housing Act of 1934. Many Americans were living in unsafe or low-quality housing, while the economic downturn caused by the Great Depression threatened the banking and construction industries. Congress passed the National Housing Act to “encourage improvement in housing standards and conditions, to provide a system of mutual mortgage [or home loan] insurance, and for other purposes.”1 Lawmakers hoped to reinvigorate the banking industry and encourage banks to make more housing loans by guaranteeing that home loans, or mortgages, would be paid back. If potential homeowners could no longer afford their mortgage payments, the federal government agreed to pay the remaining principal balance.
However, the federal government’s willingness to insure mortgages came with restrictions. Building on the previous work of the Home Owners’ Loan Corporation (HOLC), the Federal Housing Administration (FHA) conducted its own appraisals of properties, which included a “whites-only” requirement. The FHA refused to insure mortgages for properties in racially mixed neighborhoods and even some white neighborhoods bordering Black residential areas because of the possibility of integration.2 By 1938, the FHA guidelines made it clear that in their view only racially segregated neighborhoods, with all residents of the same economic class, should receive mortgages.
Like the HOLC maps, the FHA guidelines funneled government resources to segregated white communities, particularly new suburbs, while keeping resources away from low-income, racially diverse, and predominantly Black central-city neighborhoods. It is hard to fully quantify the impact of these policies on producing segregation. What is clear is that between 1934 and 1968 (when Congress passed the Fair Housing Act) over 98 percent of federally-backed home mortgages went to white people.3
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The text of the National Housing Act of 1934 can be found at https://babel.hathitrust.org/cgi/pt?id=hvd.hnffkw&view=1up&seq=1&skin=2021. ↩︎
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Richard Rothstein, The Color of Law: A Forgotten History of How Our Government Segregated America (New York: Liveright, 2018), 64-65. ↩︎
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Nikole Hannah-Jones, “Living Apart: How the Government Betrayed a Civil Rights Movement Landmark,” ProPublica, June 25, 2015, https://www.propublica.org/article/living-apart-how-the-government-betrayed-a-landmark-civil-rights-law. ↩︎
Categories: national
Tags: racist segregation, school facilities, zoning and student assignment, housing
This item is part of "Housing Policies and Patterns" in "How Did New York City Segregate its Schools?"
Item Details
Date: 1938
Creator: Federal Housing Administration
Source: HathiTrust
Copyright: Government Document
How to cite: “Underwriting Manual, excerpt,” Federal Housing Administration, in New York City Civil Rights History Project, Accessed: [Month Day, Year], https://nyccivilrightshistory.org/gallery/underwriting-manual.
Questions to Consider
- What kind of neighborhoods did the FHA favor for providing federally-insured mortgages? What ideas shaped their judgments about neighborhoods?
- How did the FHA guidelines link neighborhoods and schools? Why do you think the FHA devalued integrated schools?
- Was residential segregation the product of individual choices, government policy, or both?
References
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