Tennessee-based Bank Settles with DOJ for $1.9 Million to Resolve Redlining Allegations

The DOJ recently agreed to a consent order with a Tennessee-based bank to resolve redlining allegations in Memphis, TN.  The DOJ opened an investigation into the Bank after the Federal Reserve System conducted a consumer compliance examination of the Bank and referred it to the DOJ. 

The DOJ alleged that the Bank violated the Fair Housing Act, ECOA, and Regulation B from 2015 through 2020 by discouraging applications from and avoiding home loans and mortgage services for those in majority-Black and Hispanic census tracts.  The Bank denies these illegal conduct and redlining allegations.

Among other requirements in the consent order, the Bank agreed to expend a total of $1.9 million on various initiatives to promote homeownership in majority-Black and Hispanic census tracts.  The Bank will invest at least $1.3 million of that amount in a fund to subsidize mortgages, home improvements, and home refinance loans for those that fit into the definition of “qualified applicant.”  Subsidies from this fund will be in the form of, (i) lower than prevailing market interest rates; (ii) down payment assistance; (iii) closing cost assistance; (iv) an initial mortgage insurance premium payment; and (v) any other DOJ-approved measures.  

As part of the total expenditure, the Bank must provide at least $75,000 per year during the term of the consent order to community-based or governmental organizations that provide services such as consumer financial education and foreclosure prevention.  And, the Bank must spend at least $125,000 per year during the term of the consent order on targeted advertisements, outreach, counseling, and consumer financial education to those in majority-Black and Hispanic census tracts in the Memphis lending area.  The consent order term is at least three years.