The U.S. Department of Housing and Urban Development (HUD) reached a settlement agreement with Associated Bank concerning allegations that the Bank violated Section 804(b) of the Fair Housing Act.  According to the conciliation agreement, HUD alleged that the Bank disproportionately denied loan applications of African-American and Hispanic applicants, and under-served minority neighborhoods despite a demand for residential mortgage loans in those neighborhoods.  HUD alleged that, compared to other lenders, the Bank’s lending in majority-minority neighborhoods for five metropolitan areas between 2008 and 2013 was lower than in non-majority-minority neighborhoods at a statistically significant level.

The conciliation agreement also states that the Bank denies all allegations that it engaged in discriminatory lending.  The Bank further states that it has never before in its history been accused of discriminatory lending prior to HUD’s investigation, and that an outside economic analysis firm examining the loans at issue concluded that there was no evidence of disparate treatment.

Under the agreement, the Bank agreed to invest nearly $200 million in increased mortgage lending or purchasing in majority-minority communities.  The Bank further agreed to make available $10 million in funding for reduced interest rate, down payment and closing cost assistance for qualified loan applications in majority-minority census tracts.  Additionally, the Bank agreed to provide nearly $3 million to affordable home repair grants in minority census tracts; commit $1.4 million to affirmative marketing of loans in minority neighborhoods; spend $1.35 million on community reinvestment and fair lending education; and make donations to nonprofit organizations that serve minority communities by providing down payment and closing cost assistance. The Bank further agreed to open and maintain for a period of years four loan production offices in minority neighborhoods, and offer fair housing training to all of its employees.

HUD declared that the agreement is the largest ever obtained against a mortgage lender to resolve redlining allegations.  While discriminatory lending is always at the forefront of HUD enforcement activity and often focused on smaller, local or regional lending institutions, it remains to be seen if pursuing actions that target broader conduct in order to secure ever-larger settlements and relief is a new trend from HUD.  The agreement also continues a trend by HUD and other enforcement agencies of seeking and obtaining direct consumer relief and contributions to non-profit organizations from mortgage and consumer financial services companies.  While direct consumer relief is more palatable to mortgage and consumer financial services companies because it directly serves their customers and communities, settlement relief paid to non-profits has been gaining increased attention and scrutiny, having recently been subject to Congressional hearings over concern that such payments are politically-motivated and that the funds should instead be return to taxpayers’ coffers.  LenderLaw Watch will continue to monitor for future HUD enforcement activity to see if either of these trends continue.