FHA Underwriting Manual Codifies Racial Segregation in Mortgage Lending

The Federal Housing Administration's underwriting manuals through the 1940s explicitly instruct appraisers to downgrade properties in racially mixed neighborhoods and to ensure neighborhoods remain 'racially homogeneous.' The FHA recommends physical barriers — highways, walls — to separate Black from white areas. Between 1934 and 1962, the FHA backs $120 billion in home loans; less than 2 percent goes to non-white borrowers. The agency is a primary engine of residential segregation.