Redlining is back in the news. Last week, the Department of Housing and Urban Development announced that it approved a settlement resolving redlining claims brought by the California Reinvestment Coalition against a California-based depository institution.
Unlike DOJ's June redlining settlement with First Merchants Bank, which we wrote about here, this new case was not initiated by a government investigation, but rather by a CRC complaint filed with HUD. Unfortunately, the Conciliation Agreement does not provide details about that facts underlying CRC's concerns; it only states that CRC filed a complaint with HUD in February 2017 alleging that the bank's "branch locations, marketing, and origination of mortgages discriminated against the residents of majority-minority neighborhoods" in the bank's Community Reinvestment Act assessment area.
The settlement terms look similar to those found in other redlining settlements, and include a requirement that the bank open or acquire a branch in a majority-minority and low-to-moderate income census tract within the bank's assessment area. The bank also agreed to:
- originate $100 million worth of owner-occupied, residential mortgage loans (within the GSE conforming loan limit) in majority-minority census tracts in its assessment area;
- impose no minimum loan amount;
- offer and market FHA-insured loans in all of its assessment area branches;
- provide $5 million worth of discounts or subsidies on loans in majority-minority census tracts as part of an Affordable Home Mortgage Program;
- provide $1million to non-profit community service organizations that provide financial literacy and other benefits in majority-minority census tracts; and
- dedicate $1.3 million toward marketing and outreach to consumers in majority-minority census tracts.
Although this new settlement does not provide much detail about the factors that could prompt a redlining complaint, the settlement terms do provide insights about how institutions can expand credit opportunities in majority-minority communities and thus reduce their redlining risk.
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