Associated Bank NA will pay approximately $200 million to resolve allegations brought by the U.S. Department of Housing and Urban Development (HUD) that the bank discriminated against African-Americans and Hispanics who applied for mortgage loans from 2008-2010.
It is reportedly one of the largest redlining complaints brought by the federal government against a mortgage lender. What's more, it is the largest settlement of this kind HUD has ever reached, the agency says in a news release.
‘This settlement sends a strong message that HUD does not tolerate practices that unfairly restrict an equal and open housing market,’ says Julian Castro, secretary of HUD, in the release. ‘Discriminatory lending practices have too often cut off too many credit-worthy families from the opportunities they need to thrive. This agreement will ensure that more Americans can fulfill their hopes and aspirations.’
As part of the settlement, Associated will pay nearly $10 million in the form of lower interest rate home mortgages and down payment/closing cost assistance to qualified borrowers in majority-minority census tracts over the next three years. The affected borrowers are primarily in Chicago; Milwaukee; Minneapolis, Minn.; St. Paul, Minn.; Racine, Wis.; Kenosha, Wis.; and Lake County, Ill.
In addition, the bank has agreed to invest nearly $200 million through increased home mortgage lending activity in majority-minority census tracts in these areas as well as to provide nearly $3 million to help existing homeowners repair their properties in these predominantly minority communities.
What's more, the bank will pay $1.4 million to support affirmative marketing of loans in the above census tracts; commit $1.35 million for community reinvestment and fair lending education and training; and open four loan production offices in majority-minority census tracts (three in the Chicago area and one in the Milwaukee area), subject to regulatory approval. This is in addition to three branches Associated has opened or is committed to opening in or near majority-minority census tracts in Chicago, Milwaukee, and Racine since HUD's complaint was filed.
In addition, the bank has been ordered to provide fair housing training to all its employees and agents with substantial residential lending activity within six months and maintain a second level review process for all denied residential loans.
Through an investigation HUD officials learned that Associated Bank made few loans, compared to other lenders, in majority-minority census tracts in five metropolitan areas in Illinois, Wisconsin and Minnesota, but did make loans in nearby predominantly white tracts. This, HUD officials say, was a violation of the Fair Housing Act, which makes it unlawful to discriminate in the terms, conditions, or privileges of sale of a dwelling because of race or national origin.
Redlining is where a mortgage lender markets or advertises its mortgage products only in certain areas or neighborhoods. As such, this allows the mortgage lender to target more people of certain race of color.
Often, lenders are brought up on allegations of redlining when the data they furnish under the Home Mortgage Disclosure Act (HMDA) shows a certain level of disparity when compared to that of other lenders serving the same markets. This level of disparity in the HMDA data must be deemed statistically significant.
In addition, the agency bringing the complaint must prove that the disparity is intentional.