DOJ Settles Redlining Discrimination Allegations

Posted on May 6, 2011 by Fred Rivera

On May 5, 2011, the U.S. Department of Justice announced a $3.6 million settlement with Citizens Republic Bankcorp Inc. (CRBC) to resolve allegations that Republic Bank, acquired by Citizens in 2006,  refused to lend in predominately minority areas of Detroit in violation of the Fair Housing Act and the Equal Credit Opportunity Act.  The Complaint alleges that CRBC engaged in "redlining" by serving the credit needs of the residents of predominantly white neighborhoods in the Detroit metropolitan area to a significantly greater extent than in majority African-American neighborhoods. 

The settlement, which is subject to court approval, includes a $1.625 million neighborhood stabilization fund that, in a partnership with the city of Detroit, will be used to provide existing homeowners with grants fund exterior improvements; $1.5 million in a special financing program to increase the amount of credit the banks extend to majority African-American areas in Wayne County; and a $500,000 fund for outreach to potential customers, promotion of their products and services, and consumer financial education.  The bank also will open a loan production office in a majority African-American area in Detroit and conduct fair lending training for its employees.

Kristine Brenner, director of investor relations for Citizens Bank, said the lawsuit has no merit and the bank reached a settlement to avoid costly legal fees. “The execution of this agreement is not an admission or finding of any violation,” she said.

The lawsuit originated from a 2010 referral by the Board of Governors of the Federal Reserve System to the Justice Department’s Civil Rights Division.  

The Citizens' case, along with an on-going redlining investigation of St. Louis-based Midwest BankCentre, is a clear announcement by DOJ that redlining prosecutions are a priority of this administration.  According to a  recent BloombergBusinessweek.com article ("A Renewed Crackdown on Redlining," May 5, 2011), the DOJ is stepping up its review of potential redlining issues in the aftermath of the subprime lending crisis. In 1994, DOJ reached a landmark settlement with Chevy Chase FSB based on allegations that the bank refused to provide residential mortgage loans in predominately minority areas of the Washington, D.C. metropolitan area. (Read: U.S. v. Chevy Chase Press Release)  Chevy Chase was the first DOJ suit--and last since the recent Citizen's settlement--focusing solely on a bank's refusal to market its services in minority neighborhoods.
 

 

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DOJ Settles Lending Discrimination Case Against Alabama Bank

Posted on October 2, 2009 by Fred Rivera

United Security Bancshares Inc., Thomasville, Ala., entered into a settlement agreement with the Department of Justice's Civil Rights Division to resolve allegations that its subsidiary First United Security Bank violated the Fair Housing Act and the Equal Credit Opportunity Act when dealing with African-American borrowers.  According the the Justice Department's press release, the Complaint alleged that the bank charged African-American borrowers higher rates than similarly-situated white borrowers on home mortgage-related loans. The complaint also alleged that the bank engaged in unlawful "redlining" by failing to provide its lending products and services on an equal basis to majority African-American areas in west central Alabama.

Under the Consent Order, which remains subject to court approval, First United Security Bank will invest more than $600,000 to open a new branch in an African-American neighborhood in west central Alabama and take other steps resolve allegations that it engaged in a pattern of discrimination on the basis of race.  The additional steps include investing $500,000 in a special financing program, and spending more than $110,000 for outreach to potential customers, promotion of its products and services and consumer financial education in the redlined areas.

The lawsuit originated from a referral from the Federal Deposit Insurance Corporation (FDIC), according to the DOJ press release.

This is the first Fair Lending case regarding mortgage lending filed by the Justice Department in over a year, and comes on the heals of the FFIEC's release of 2008 HMDA data that, according to  a Wall Street Journal article summarizing the HMDA report, shows that African-Americans and Hispanic whites were far more likely than non-Hispanic whites to be denied last year in applying to refinance.

 

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Attorney General Holder Commits to Fighting Lending Discrimination, Mortgage Fraud

Posted on June 21, 2009 by Fred Rivera

On June 17, 2009, Attorney General Eric Holder testified before the United States Senate Committee on the Judiciary regarding the U.S. Department of Justice's recent accomplishments and current priorities.  In his statement, Holder made clear that prosecuting mortgage fraud and other financial crimes will continue as a top Department priority.  In addition, he emphasized the Department's commitment to combating lending discrimination.

In addition to focusing on fraudulent scams, I am committed to ensuring that homeowners who may be having difficulty making their mortgage payments do not experience discrimination and can benefit in equal measure from legitimate loan modification programs and other federal programs to provide mortgage assistance and stabilize home prices. Discrimination in lending on the basis of race, national origin, or other prohibited factors is destructive, morally repugnant, and against the law. Lending discrimination prevents those who are discriminated against from enjoying the benefits of access to credit, including reasonable mortgage payments, so they can stay in their homes and provide much needed stability for their neighborhoods. We are using the full range of our enforcement authority to investigate and prosecute this type of unacceptable lending discrimination.

Beginning in the early 1990's with ground-breaking cases filed and settled against Decatur Federal Savings & Loan (consent order), Chevy Chase FSB (consent order), and Shawmut Mortgage (consent order), the DOJ's Civil Rights Division aggressively pursued lending discrimination investigations and prosecutions concerning underwriting, pricing, and redlining.   However, more recently the number of filings in this area has dropped precipitously for a number of reasons, not the least of which is the abundance of available credit in the market and changed priorities within the Department.  With a tightening credit market, more stringent underwriting standards, and a re-committed Justice Department, Attorney General Holder's recent statement may signal a renewed interest in lending discrimination matters. 

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