State-Chartered Bank Settles DOJ’s Redlining Claims
A state-chartered bank recently entered into a proposed consent order with the DOJ to resolve allegations of redlining in violation of the Fair Housing Act and ECOA. As part of the settlement, the bank has agreed to pay over $1.15 million to promote homeownership in majority-Black and Hispanic neighborhoods.
Following a referral from the FDIC, the DOJ had launched an investigation into the bank to determine whether it had engaged in redlining. After conducting its investigation, the DOJ filed a complaint in federal court, alleging that the bank had failed to provide mortgage lending services to majority-Black and Hispanic neighborhoods from 2017 through at least 2021. Specifically, the DOJ alleged that all of the bank’s branches and loan production offices had been located in majority-white neighborhoods; its loan officers, outreach, and advertising had focused on majority-white neighborhoods; and it failed to implement effective fair lending compliance management systems. The DOJ further alleged that the bank had disproportionately low numbers of home loan applications from and home loans in majority-Black and Hispanic neighborhoods as a result of those practices. The DOJ also alleged that emails from loan officers and executives contained racist and discriminatory language.
As part of the proposed Consent Order, which is subject to court approval, the bank has agreed to pay $950,000 into a fund aimed at promoting homeownership in majority-Black and Hispanic neighborhoods, in addition to $200,000 in loan subsidies and community outreach initiatives. The bank has also agreed to open a community-oriented loan production office in a majority-Black and Hispanic community. Additionally, the bank has agreed to submit a Fair Lending Status Report and Compliance Plan that will describe its revised mortgage lending policies and practices, amongst other things, and to provide fair lending training to its employees.
The bank neither admits nor denies the allegations.
