Often talked about as a thing of the past, redlining is still a barrier to equity in homeownership. The Department of Justice recently announced a new program to combat redlining and discrimination in lending.
As reported by Reuters, Attorney General Merrick Garland announced the Department of Justice would partner with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency to ensure fair lending practices.
The new initiative comes as the DOJ reached a settlement against Trustmark for engaging in lending discrimination. An investigation found Trustmark engaged in unlawful redlining by avoiding Black and Latino neighborhoods in Memphis through lending and opening branches. Trustmark was also found to have sufficient internal policies to address the issues.
“Trustmark purposely excluded and discriminated against Black and Hispanic communities,” said Director Rohit Chopra of the Consumer Financial Protection Bureau (CFPB). “The federal government will be working to rid the market of racist business practices, including those by discriminatory algorithms.”
In remarks about the new effort to address redlining, Assistant Attorney General Kristen Clarke said the Trustmark case was an example of the DOJ Civil Rights Division’s dedication and work.
Our commitment to combatting redlining is evident in the settlement against Trustmark. The resolution we achieved jointly with the Bureau resolved the government’s allegation that Trustmark engaged in lending discrimination by redlining predominantly Black and Hispanic neighborhoods in Memphis, Tennessee. The bank is working now to improve its fair lending compliance and has demonstrated a commitment to the terms and goals of this settlement.
Under the proposed consent order that we’ll be filing today, Trustmark will invest $3.85 million in a loan subsidy fund to increase credit opportunities for residents of predominantly Black and Hispanic neighborhoods in the Memphis area. Loan subsidy funds help level the playing field so that every qualified applicant has an equal opportunity to obtain credit.
They will dedicate mortgage loan officers or community lending specialists to these neighborhoods and open a loan production office in a majority-Black and Hispanic neighborhood in Memphis.
Trustmark will devote $400,000 to develop community partnerships that provide residents of majority-Black and Hispanic neighborhoods in Memphis with services to help increase their access to residential mortgage credit. It will devote at least $200,000 per year to advertising, outreach, consumer financial education, and credit repair initiatives in and around Memphis.
The department opened its investigation after one of Trustmark’s regulators, the OCC, referred the matter. This settlement is the culmination of joint enforcement by the Department and the Consumer Financial Protection Bureau, and I want to thank our partners for their work in securing this resolution.
The government reached a similar settlement with the lender Cadence Bank back in August. Cadence Bank discriminated against residents of predominantly Black and Latino communities in Houston.
Without an aggressive policy to address discrimination in lending, the 1968 Fair Housing Act alone has been insufficient to remedy ongoing disparities.
According to the DOJ, the gap in Black and white homeowner rates is more significant today than in the 1960s.