First Federal Bank of Kansas City will pay $2.8 million to resolve a complaint brought by the U.S. Department of Housing and Urban Development (HUD) that the bank discriminated against African Americans by excluding minority neighborhoods from its service area.
Although the bank agreed to pay the fine, it did not admit to any wrongdoing.
The settlement stems from complaints brought by two nonprofit organizations – Metropolitan St. Louis Equal Housing and Opportunity Council and Legal Aid of Western Missouri – regarding the bank’s alleged lack of market penetration in certain neighborhoods in the East Side section of Kansas City, Mo.
The groups allege that the bank designated its service area, or assessment area, in a way that excluded areas of high African American concentration, which resulted in residential real estate products being less available to persons based on race. This practice, commonly known as redlining, is a violation of the Fair Housing Act.
Once HUD was alerted to the situation, it conducted its own investigation.
As per the HUD-mediated conciliation agreement, First Federal Bank of Kansas City will provide $75,000 in discounts or subsidies on home purchase loans on owner-occupied properties in majority African American census tracts in the Kansas City metropolitan area over a three-year period. In addition, the bank must originate $2.5 million in mortgage loans in majority African American neighborhoods over a three-year period.
In addition, the bank must provide $105,000 to support a loan pool that finances the rehabilitation of vacant, blighted homes in distressed areas of Kansas City. It also must provide $50,000 – at the rate of at least $15,000 per year for three consecutive years – for affirmative marketing and outreach to African American communities in the Kansas City metropolitan area.
First Federal Bank of Kansas City has also been ordered to pay $30,000 for financial education for African American families and $50,000 directly to the named nonprofits to support their fair lending and community reinvestment work.
What’s more, the bank must appoint a community development lender to help it better target low- to moderate-income families in majority African American neighborhoods.
Finally, conditional on regulatory approval of a planned merger, the bank must also maintain three full-service established branches in majority/minority census tracts.
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