Consumer Finance Insights
June 10, 2016

Department of Housing and Urban Development Announces Settlement with National Bank over Alleged Discriminatory Lending Practices

On June 8, 2016, the Department of Housing and Urban Development (HUD) announced it entered into a settlement agreement with a national bank over allegations the bank engaged in discriminatory lending practices in violation of the Fair Housing Act. According to HUD, the bank discriminated against African American, Latino American and Asian American borrowers by denying mortgage applications from these borrowers at a disproportionately higher rate compared to majority populations.  HUD discovered the alleged discrepancies after analyzing loan data the bank provided pursuant to the Home Mortgage Disclosure Act. HUD was not satisfied with the bank’s explanation for the observed discrepancies and initiated a Fair Housing Act investigation. The bank denied that it engaged in discrimination, but agreed to settle the claims to avoid further investigation costs and potential litigation. Under the agreement, the bank must adopt additional objective criteria for approving mortgage applications to ensure compliance with the Fair Housing Act, arrange Fair Housing Act training for some employees, provide $140,000 in grants to nonprofits focused on credit and housing counseling, spend $20,000 on marketing and advertising in majority-minority census tracks, and conduct financial education classes. The bank also agreed to hire three mortgage banker market specialists who will focus on lending to diverse populations.