Sources: 1975 Residential Sales Data - Chicagoland SREA Market Data Center FHA The CHAIRMAN. Our final witness is Prof. Calvin Bradford, of the University of Illinois. This seems to be Illinois' day here. We have three of the six witnesses that are from Illinois. STATEMENT OF PROF. CALVIN BRADFORD, UNIVERSITY OF ILLINOIS Mr. BRADFORD. Thank you. Mr. Chairman, Senator Garn, I'm the codirector of the urbansuburban investment study group which is a collection, a loose collection of a group of lawyers, academics and researchers in Chicago which has been studying urban investment and disinvestment in relation to central city decay and suburb development for about 51⁄2 years now. I think we probably represent the largest considered effort to study this process in the country. We have worked for governors' commissions for the State of Illinois. We have published in the field and worked for State and local agencies for the last 4 of those 51⁄2 years. I presently have a contract with the Equal Opportunity Office of HUD to do my own summary of their administrative meeting in Philadelphia and to place it in the larger redlining issue. I'd like, since I can't share the reports with you since they are not complete, to draw on them in my testimony today. I certainly don't want to submit the transcript of that meeting as part of this record, but I commend them to you and the staff to read. Those particular hearings I think are important because although your own hearings on the Home Mortgage Disclosure Act represent the most aggressive study of community studies and we wish those would be reprinted because a lot of people still would like copiesthe hearings that were held by HUD in Philadelphia represented an expansion of this to a larger group of actors. They not only had community groups and members of lending institutions and regulatory agencies, but representatives of the real estate and insurance industry and representatives of the secondary mortgage market. It represents a broadening of the issue which I think reflects a movement of the community groups and the State regulators to deal with the larger range of those actors and people involved in the disinvestment process. As I summarize both the history and, I think, the legislative trends in this area, it strikes me that it is very similar to the process that we often see in civil rights cases. We have a complaint filed and we have peopple showing that there is a law which has been broken or may have been broken by whatever acts they, the defendants, are charged with. Then they develop a prima facie case. If the court accepts this prima facie case they move to a period of discovery which is, in essence, to gather all information that would be necessary to make a decision on the merits of the case. It strikes me that the Home Mortgage Disclosure Act represents that point of discovery and I wish to suggest to you that the trend of the disinvestment redlining issue has moved to a point where the rules of discovery are the critical issue. I would say first of all that it's quite evident from your own hear by the community organizations. I would commend to you a background paper prepared for the HUD hearings called Redlining and Disinvestment Causes, Consequences and Proposed Remedies, and I'm sure you can get a copy from Assistant Secretary Blair's office. It is a legal background paper prepared by the housing and economic law development project at Berkeley. It is a very detailed study of the progress of civil rights law in this area. It not only describes progress particularly through title VIII in the 1968 law, but ends with very strong statements about the case of Laufman versus Oakley and a summary ruling last February of 1976 by that court that if in fact the institution charged had redlined there would be a violation of title VIII. Therefore it establishes clearly that such redlining would be a violation of the act. While I just recommend that to you, I would like to read one short statement from the court's opinion. Rather than just ruling that it was a violation of the law, the court went on to say: Little imagination is required to understand that the imposition of barriers to occupancy in the form of higher mortgage interest rates or refusals to make loans in housing in changing neighborhoods works to discourage families, white and black, which could afford to purchase homes in such neighborhoods. The practical effect is to discourage whites who may freely move elsewhere from moving into vacancies in "changing" neighborhoods, thereby inducing "massive transition" and ultimately "white flight." Thus, according to this view, redlining directly contributes to the decay of our cities. That's the opinion of the court in that case. So I think we have moved to that legal stance, and if you will refer to that document, it will be very instructive. On the point of developing a prima facie case, since it appears there would be a law violated if people did redline, we have all the community studies, which, I and most of the community people concede, have some weaknesses in data as is often the case prior to discovery. I'm only suggesting that there is some evidence that in fact discrimination took place and that discovery is required to see if, in fact, it did. Although some of the studies are very weak, some of the studies are very sophisticated. One of the studies, done by Ms. Cincotta of Chicago, showed that while the quality of housing stock in selected neighborhoods was similar, redlining took place only in those neighborhoods undergoing racial change. There are also some other careful studies done which were part of your previous hearings, particularly studies done in northwest Philadelphia and in Baltimore. In the Philadelphia hearings there were some interesting additional studies presented as well. The industry response to this was basically, at the outset, to say there was no redlining. That didn't hold up very well and rather early on in the game I can recall attending meetings of the five regulatory agencies in Chicago where the Director of the Federal Home Loan Bank of Chicago said, "Of course, there is redlining." He conceded that it existed and since then I find that the regulatory agencies have not denied redlining, but in essence have said redlining exists but it represents a sound business practice. That is basically, I think, the tack they have been taking ever since. In your own hearings going through Federal regulations (I won't quote them) but if you look at the Federal Home Loan Bank Board's |