Bank accused of widespread redlining pays $13 million settlement
Feds say Lakeland Bank has repeatedly denied mortgages to candidates from black and Latino neighborhoods
Lakeland Bank will pay a $13 million settlement after the U.S. Justice Department says the lender for years denied mortgages to applicants seeking to buy homes in black and Latino neighborhoods in the Newark metro area, New Jersey.
After a year-long investigation, federal prosecutors announced this week that Lakeland Bank has decided not to pursue a federal lawsuit alleging discrimination.
The complaint accused the 53-year-old lender of redlining, after federal officials discovered that Lakeland Bank had engaged in a “pattern of practice” of denying mortgages in black and Latino neighborhoods in a metropolitan area that ‘it shares with New York City of nearly 20 million people. people.
Federal investigators also said that all Lakeland Bank branches were located in majority-white neighborhoods and that its loan officers did not serve the credit needs of black and Hispanic neighborhoods in and around Newark.
Federal officials did not specify how many applicants were denied mortgages, but said the alleged practice occurred between 2015 and 2021.
“Financial institutions that refuse to provide mortgage services to communities of color not only contribute to the persistent racial wealth gap that exists in this country, but also violate federal law,” said Attorney General Merrick B. Garland.
“The agreement with Lakeland announced today represents the Department of Justice’s continued commitment to combating modern redlining and ensuring that all Americans have the same opportunity for credit, regardless of race or ethnicity. national origin.”
Redlining is an illegal and discriminatory practice in which lenders deny mortgages and credit services to applicants living in black and minority neighborhoods.
Under the administration of President Franklin D. Roosevelt, the U.S. government engaged in redlining in cities across the country through its Federal Housing Administration (FHA), which was created by the National Housing Act of 1934.
The widespread practice hastened the decline and decay of downtown neighborhoods and made it difficult to attract and retain black homeowners.
This practice created a housing crisis in Chicago as the black population exploded during the Great Migration. The late pioneering Chicago real estate magnate Demsey Travis, along with the defunct Seaway Bank, provided thousands of mortgages to black people who had been denied home loans by white banks.
In 2015, The Associated Bank paid a $200 million settlement after a three-year investigation by the U.S. Department of Housing and Urban Development found the lender deliberately rejected residents’ mortgage applications. blacks and latinos. The settlement forced Associated Bank to open branches in black and minority neighborhoods.
In the case against Lakeland Bank, the lender accepted a consent order as part of the settlement.
Under the proposed consent order, which is subject to court approval by the U.S. District Court for the District of New Jersey, Lakeland has agreed to:
• Invest at least $12 million in a loan subsidy fund for residents of Black and Hispanic neighborhoods in the Newark area; $750,000 for advertising, consumer awareness and education; and $400,000 for the development of community partnerships to provide services that improve access to residential mortgage credit.
• Open two new branches in colored neighborhoods, including at least one in the city of Newark; ensure that at least four mortgage officers are dedicated to serving all neighborhoods in and around Newark; and employ a full-time community development worker who will oversee the continued development of loans in Newark-area neighborhoods of color.
• Maintain an expanded assessment area under the Community Reinvestment Act that includes Essex, Somerset and Union counties.
“Redlining creates an uneven playing field that unfairly prevents many people of color from achieving the dream of homeownership, and this type of systemic and intentional discrimination cannot and will not be tolerated,” said U.S. Attorney Philip R. Sellinger.
“It is completely unacceptable that redlining persists in the 21st century, and this case demonstrates our commitment to fighting redlining and holding banks and others accountable when they engage in unlawful discrimination. With this agreement, we are taking a big step forward in removing illegal and discriminatory barriers to residential mortgage lending.
In October 2021, Attorney General Garland launched the Justice Department’s Combatting Redlining Initiative, which aims to address systemic discrimination against black and minority communities. Since the initiative’s launch, the department has announced four redlining cases and settlements with a combined relief of $38 million for communities that have experienced lending discrimination. This includes the $20 million settlement with Trident Mortgage Company, the second largest settlement in Justice Department history.
Individuals can report loan discrimination by calling the Department of Justice’s Housing Discrimination Hotline at 1-833-591-0291 or by submitting a report online. Individuals can also report civil rights violations through https://www.justice.gov/usao-nj/civil-rights-enforcement or can call the U.S. Attorney’s Civil Rights Hotline at (855) 281-3339.