Cadence Bank reaches settlement with DOJ on redlining
Cadence Bancorporation, parent company of Cadence Bank, has entered into separate settlements with the department of Justice and the Treasury Department Office of the Comptroller of the Currency totaling more than $ 8.5 million for redlining practices, according to the federal government.
The DOJ alleged that between 2013 and 2017, the bank violated the Fair Housing Act and the Equal Credit Opportunity Act “by avoiding predominantly black and Hispanic neighborhoods. [in the Houston, metro area] because of the race, color and national origin of the people living in these neighborhoods.
In response to these grievances, Cadence agreed to invest more than $ 5.5 million to increase credit opportunities for residents of these neighborhoods.
Specifically, Cadence will provide $ 4.17 million to create a loan grant fund for residents of predominantly Black and Hispanic neighborhoods in the Houston area, $ 750,000 for the development of community partnerships to provide services that improve access to residential mortgage credit in these neighborhoods. At least $ 625,000 will be allocated for advertising awareness, consumer financial education and credit repair initiatives, the DOJ said Monday.
In addition, the bank, with assets totaling more than $ 18 billion, will pay the OCC $ 3 million to cover penalties related to the violations alleged in the department’s complaint. (The Justice Department opened its investigation after the OCC referred the case, the department noted.)
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“When banks fail to provide equal access to credit in communities of color, they violate our civil rights laws and deny people in those communities the opportunity to create wealth,” said Kristen Clarke, Deputy Attorney General in the Civil Rights Division of the DOJ.
The DOJ also claims that bank loan officers were not meeting the credit needs of predominantly black and Hispanic neighborhoods, and that Cadence’s outreach and marketing avoided minority neighborhoods.
Under the agreement, the bank is also expected to dedicate at least four mortgage LOs to the predominantly black and Hispanic neighborhoods of Houston and employ a director of community loans and development who will oversee those efforts, the DOJ said.
Paul Murphy, CEO of Cadence Bancorporation, released a statement Monday acknowledging that his mortgage program is not where the company “wanted it to be”, although he did not quote the term “redlining” in his statement.
“We then developed and successfully implemented a coordinated set of efforts to sustainably increase our lending in majority minority census tracts and minority neighborhoods in Houston,” he said. “Over the past few years, the percentage of our Houston residential mortgages in minority neighborhoods has reached 50% or more, surpassing our peers. We are satisfied with our results today.
Murphy said that in response to “Houston’s mortgage proportionality issues,” the company “has its own… neighborhoods.”
The Texas-based bank also has branches in Alabama, Florida, Georgia and Tennessee. Mortgages in the Houston area represent about 40% of the company’s total mortgage business, the DOJ said.
Cadence is in the midst of a merger with the $ 28 billion regional asset bank BancorpSouth, based in Tupelo, Mississippi. BancorpSouth Bank expects the transaction to close in the fourth quarter of 2021 and expects full integration to take place in the second half of 2022.
At the end of June, the Consumer Financial Protection Bureau said several U.S. lenders have recently engaged in deceptive business practices, including violations of the Truth in Lending Act and the Equal Credit Opportunity Act, and provided inaccurate data on Mortgages. The agency did not name the lenders or services it examined and did not impose any fines or penalties. Redlining was among the problems.
The CFPB said a lender – who set off red flags when it received fewer requests from minority neighborhoods – has engaged in the redlining. In the lender’s direct marketing and open house materials, the models were white. The lender’s offices were concentrated in white neighborhoods and almost all of its loan officers were white. The CFPB also found that loan officers sent internal emails “containing racist and derogatory content”.