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A Tennessee-based neighborhood financial institution this week grew to become the eleventh lender to achieve a settlement with the U.S. Division of Justice over allegations that it prevented making loans in majority-Black and Hispanic neighborhoods in Memphis. In agreeing to pay $1.9 million to resolve the allegations, Patriot Financial institution denied that it had ever engaged in redlining.
John Smith
“Patriot Financial institution has all the time acted to serve the house mortgage credit score wants in minority neighborhoods, and the financial institution’s sturdy file speaks for itself and flatly contradicts any allegation of wrongdoing,” Patriot Financial institution President and CEO John Smith mentioned in a assertion. “We’re happy with our file and strongly deny that Patriot Financial institution ever prevented originating residence mortgage loans in Black and Hispanic areas of the Memphis market.”
In its criticism, the Division of Justice mentioned that from 2015 by no less than 2020, Millington-based Patriot Financial institution positioned “practically all its branches and mortgage manufacturing places of work and all its mortgage mortgage officers” into majority-white neighborhoods. Patriot additionally “concentrated its outreach, promoting, and advertising in majority-white neighborhoods and prevented advertising to majority Black and Hispanic areas,” the federal government alleged.
Consequently, solely 7.6 p.c of residential mortgage loans Patriot created from 2015 by 2020 have been made in majority-Black and Hispanic areas, prosecutors alleged. Opponents within the financial institution’s peer group “made residence loans in majority-Black and Hispanic areas at nearly thrice the speed of Patriot,” with these neighborhoods accounting for 22.6 p.c of their enterprise, the criticism mentioned.
Kristen Clarke
“The Justice Division is devoted to stamping out discriminatory lending practices throughout this nation and we’re vigorously dedicated to holding lenders accountable, regardless of their dimension,” Assistant Legal professional Basic Kristen Clarke mentioned in a assertion. “This settlement will present many Memphis households with entry to credit score that may enhance the standard of their lives whereas opening up alternatives to construct intergenerational wealth.”
Pending courtroom approval, the consent order would require Patriot to speculate $1.9 million to extend credit score alternatives for communities of shade in Memphis, together with:
- A minimum of $1.3 million to be earmarked for a mortgage subsidy fund aimed toward rising entry to residence mortgage, residence enchancment and residential refinance for residents of majority-Black and Hispanic neighborhoods
- $375,000 for promoting, outreach, shopper monetary schooling and credit score counseling targeted on majority-Black and Hispanic neighborhoods
- $225,000 on neighborhood partnerships to supply companies that enhance residential mortgage credit score
As well as, the consent order requires Patriot to dedicate no less than two mortgage mortgage officers to serving majority-Black and Hispanic neighborhoods, and make use of a director of neighborhood lending to supervise the continued growth of lending in communities of shade.
In its criticism, the Division of Justice mentioned that solely two of Patriot’s six branches have been positioned in a majority-Black and Hispanic neighborhood, and not one of the financial institution’s three mortgage manufacturing places of work have been.
As a result of Patriot had not assigned any mortgage mortgage officers to the 2 branches positioned in a minority neighborhood, the federal government alleged that if a would-be homebuyer walked into a type of branches to look into taking out a mortgage, “employees at these branches would refer the potential applicant to a special Patriot department location the place mortgage help was out there over 15 miles away.”
Moreover, Patriot “didn’t promote on radio stations particularly focused to Black and Hispanic communities within the Memphis evaluation space till 2020,” prosecutors mentioned.
Patriot’s regulator, the Federal Reserve Board, put the financial institution on discover in 2015 that its lending practices have been creating redlining threat, and in 2019 launched an examination targeted on redlining. The examination discovered proof that Patriot had engaged in “a sample or observe of discrimination” in violation of truthful lending legal guidelines.
After receiving a notification from the Federal Reserve Board in November, 2020, the Division of Justice opened its investigation in January 2021.
Patriot employed a third-party marketing consultant in February 2021 “to conduct an in depth evaluation of Patriot’s truthful lending compliance administration system,” the consent order notes. Based mostly on the evaluation, in April 2021 the financial institution established formal insurance policies for siting branches with truthful lending in thoughts, conducting truthful lending coaching for mortgage officers and advertising to minority census tracts.
The financial institution had beforehand opened a 3rd full-service department in a majority-Black and Hispanic census tract, within the Metropolis of Memphis, and employed an economist to conduct annual monitoring of mortgage underwriting, pricing, steering, and redlining threat, and an annual truthful lending monitoring plan.
Patriot claims that in 2021, it ranked 14th out of 482 lenders in making mortgage loans in minority areas of Memphis, and fifteenth out of 534 lenders in 2022.
“As one of many prime mortgage lenders to minority areas within the Memphis market, the financial institution doesn’t perceive why the [Department of Justice] has pursued this matter,” Patriot Financial institution mentioned in a press release. “The financial institution entered right into a consent order with the DOJ as a result of the phrases of the settlement affirm and undertake the packages and actions that the financial institution has already been implementing by itself for a few years to assist meet mortgage credit score wants within the communities it serves, together with its funding of $1.9 million in reaching and serving communities of shade, because the consent order itself states.”
Since saying a Combating Redlining Initiative in October 2021, the Division of Justice has reached settlements totaling greater than $109 million with 11 lenders, together with:
- Jacksonville, Florida-based Ameris Financial institution, which agreed in October 2023 to a $9 million settlement aimed toward bettering entry to credit score in majority-Black and Hispanic neighborhoods.
- The Washington Belief Firm, agreed in September 2023to speculate and spend no less than $9 million to enhance entry to mortgage credit score in minority neighborhoods in Rhode Island.
- Newark, Ohio-based Park Nationwide Financial institution agreed in February 2023to speculate no less than $7.75 million in a mortgage subsidy fund to extend entry to credit score in majority-Black and Hispanic neighborhoods within the Columbus space.
- In what was touted as the most important redlining settlement ever reached by the Division of Justice, Metropolis Nationwide Financial institution in January 2023 agreed to speculate no less than $31 million in majority-Black and Hispanic neighborhoods in Los Angeles County.
- Lakeland Financial institution in September 2022 agreed to speculate no less than $12 million in a mortgage subsidy fund for residents of Black and Hispanic neighborhoods within the Newark, New Jersey metropolitan space, together with neighborhoods in Essex, Somerset and Union counties.
- Berkshire Hathaway-owned Trident Mortgage Firm in July 2022 agreed to speculate greater than $20 million to create residence possession alternatives in communities of shade round Philadelphia.
In saying the settlement with Ameris Financial institution, Legal professional Basic Merrick Garland mentioned the Justice Division had over two dozen ongoing investigations into redlining throughout the nation.
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