On August 28, the U.S. Department of Justice (DOJ) announced its eighth redlining settlement under its Combatting Redlining Initiative. The settlement between the DOJ and the American Bank of Oklahoma, which originated from a referral by the Federal Deposit Insurance Corporation (FDIC), aims to resolve allegations that the bank engaged in a pattern or practice of lending discrimination by redlining historically Black neighborhoods in the Tulsa, Oklahoma Metropolitan Statistical Area (Tulsa MSA). Under the terms of the proposed consent order, American Bank of Oklahoma will pay more than $1.15 million to resolve the allegations that it engaged in a “pattern or practice” of redlining in violation of the Fair Housing Act and the Equal Credit Opportunity Act.

In the complaint, which was filed in the federal district court for the Northern District of Oklahoma, the DOJ alleged that from 2017 through 2021, the bank avoided providing mortgage lending services to majority-Black and Hispanic neighborhoods in the Tulsa MSA. The complaint also alleged that all the bank’s branches and loan production officers were located in majority-white areas. In addition, the DOJ alleged that the bank delineated a market area that excluded all majority-Black and Hispanic neighborhoods in the Tulsa MSA. Finally, the DOJ alleged that the bank’s peer lenders made mortgage loans in majority-Black and Hispanic neighborhoods at more than six times the rate of the bank. The DOJ also asserts that, in 2018, the FDIC informed the bank that it had significant fair lending risk and recommended specific measures to address the risk, such as tracking applications from majority-Black and majority-minority neighborhoods, but the bank did not take these steps.

The proposed consent order, if entered by the court, would require the bank to:

• Invest at least $950,000 in a loan subsidy fund to increase credit for home mortgage loans and lines of credit for consumers applying in majority-Black and Hispanic census tracts in the Tulsa MSA.
• Spend at least $100,000 in advertising, community outreach, and consumer financial education programs and credit counseling in the Tulsa MSA.
• Spend at least $100,000 in developing partnerships with one or more community-based or governmental organizations that provide the residents of majority-Black and Hispanic census tracts in the Tulsa MSA with services related to credit, financial education, homeownership, and foreclosure prevention.
• Establish a community-oriented loan production office in a majority-Black and Hispanic census tract in the Tulsa MSA.
• Assign no fewer than two full-time loan officers to solicit mortgage applications primarily in majority-Black and Hispanic census tracts in the Tulsa MSA.
• Employ a full-time director of community lending to oversee the continued development of lending.

Our Take:

Obviously, the announcement of another redlining case underlines the seriousness of the federal regulatory agencies’ commitment to bringing such cases, so the mortgage industry must still be highly vigilant to assess their redlining risks and take action to control those risks. In terms of the facts alleged, this looks like a very doctrinaire redlining claim that adheres to the traditional pattern of allegations in such cases — which is a good thing, because it gives the industry a clear signal about the type of conduct to avoid.