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Originally Posted by iheartthed
[*]Shift to home ownership, HUD and VA Loans. The U.S. strongly encouraged home ownership as a wealth building tool, particularly to returning vets from WW2, but terms for the loans strongly favored houses in the suburbs over urban housing.
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I believe that you meant FHA rather than HUD.
To this day, FHA-backed mortgages require a much more detailed inspection than conventional mortgages. For example, I've heard that simple stuff like a loose railing can cause a FHA inspection to fail.
Obviously, a brand-new structure is much more likely to pass a FHA inspection now or in the 1930s when the FHA was established.
A lot of sellers refuse to accept offers from buyers going FHA because they fear that the closing period will take months.
NPR and other reliably left-leaning news outlets call this "discrimination", but it just plain makes sense if you take a step back. The FHA doesn't want broke people buying homes that need extensive repairs. Sellers want to sell a house ASAP, not go through a tedious three month back-and-forth with FHA inspectors demanding repairs to a house they're still living in.
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The most famous was redlining, but borrowers also couldn't get gov't backed loans to buy multi-tenant units even if they wanted.
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You can buy a multifamily up to four units with an FHA loan (I don't know about a VA loan).
The government didn't create redlining, the many local and regional banks did. Historically, banks were chartered by and catered to specific ethnic groups and religions. There were German banks, Jewish banks, Catholic banks, etc. Obviously, a bank didn't want to be holding mortgages in a neighborhood that suddenly lost its value. People start walking away from their homes since they can't cover the difference between what they owe and what the house will sell for. When that happens too many times, the bank goes bust.
Again, is this "discrimination"? No, it's just good business.
When you realize that local banks were at risk during demographic changes, it's easier to understand why blue bloods welcomed interstate highway construction through the heart of town, slum clearance, etc. It got bad mortgages off their books.