“Redlining is making a comeback…”
So said Steve Rosenbaum, chief of Housing and Civil Enforcement in the DOJ’s civil rights division, at a recent HUD hosted fair housing conference.
The conference, attended by a number of DOJ, CFPB and HUD officials, highlighted the DOJ and CFPB’s cooperation in pursuing fair lending complaints.
When an attendee at the conference complained that lenders were not making small mortgage loans in an African-American neighborhood of Dayton, Ohio, Patrice Ficklin, head of the fair lending office at the CFPB encouraged the attendee to file a complaint, noting that the CFPB “is also pursuing redlining cases.”
These comments prompt the question to bankers, “What are you doing to protect your institution from Steve and Patrice?” To keep these two people at bay, banks need to perform two kinds of redlining analysis: intra-bank redlining and inter-bank redlining analysis.
Intra-bank Redlining and Inter-bank Redlining Analyses
Intra-bank redlining analysis is the typical redlining analysis that is associated with mapping and donut holes. In this type of analysis, you geocode and map your mortgage or other applications. Then look to make sure there are no groups of contiguous majority-minority census tracts in your assessment area that are not producing applications from prohibited basis applicants.
Inter-bank analysis essentially looks at your bank’s performance vis-à-vis your peers in a given area. That is, if your institution is not getting a similar share of applications from a given set of majority-minority census tracts as your peers, then the regulators may assume you are redlining.
At last week’s conference, the CFPB and HUD also announced a memorandum of understanding between the agencies which outlines cooperation between the agencies in pursuing fair lending cases.
“This MOU extends an already robust and excellent working relationship between HUD’s office of fair housing and CFPB on a variety of issues,” said Katherine O’Regan, assistant secretary for policy development and research at HUD.
What should you do? It’s obvious. Perform your redlining analysis. And remember, redlining can occur not only in the housing market but in other markets such as credit cards, autos and consumer loans.
If you need some help figuring out what to do or doing the actual work. Please give Preiss&Associates a call or email us. Either way, we will be pleased to be helpful.