January 2, 2024
By Julie Piepho, Principal, BlackFin Group
Last month we talked about the history of redlining and what the DOJ’s Combating Redlining initiative has done to date from October 2021. Redlining is happening not only to banks and credit unions but will be happening to independent mortgage bankers.
Redlining isn’t just about CRA – it’s about discrimination against minority groups.
Being fined by the CFPB is costly both financially and reputationally. Ameris Bank has a proposed consent order where they will invest $9 million to increase opportunities for communities of color. Some of the specifics of the consent order are:
Invest $7.5 million in a loan subsidy fund that will be made available to residents of majority-Black and Hispanic neighborhoods and those seeking credit in those communities.
Invest $900,000 for advertising and outreach targeted toward the residents of these neighborhoods.
Invest $600,000 to develop community partnerships to provide services that increase access to residential mortgage credit.
Open a new branch in a majority-Black and Hispanic neighborhood in Jacksonville.
Ensure that at least three mortgage loan officers are dedicated to serving majority-Black and Hispanic neighborhoods.
Retain a consultant to assess the bank’s compliance management system as it pertains to redlining risk.
Employ a full-time Director of Community Lending who will oversee the continued development of lending in majority-Black and Hispanic neighborhoods in Jacksonville.
What can you do to be proactive? Develop a robust compliance program that:
Examines lending patterns for disparate impact
Addresses any statistically significant disparities
Assesses its physical presence during mergers and expansions
Oversees marketing campaigns and outreach efforts – be very diligent and have diverse LOs
Understands its CRA assessment area and REMA
Within your compliance plan you need to know your peers. What is the statistically significant difference between you and your peers? That does become an important statistic. Speaking from experience!
Hire a partner, such as iEmergent to help you with the data. They can not only help you increase loans to diverse borrowers and help you understand where the diverse markets are, they can help you find and close gaps in sales coverage, improve LMI lending, recruit and retain top MLOs as they have the data to increase more loans, they can also identify new partners to connect to your communities and build SPCPs and other programs.
Even if you are in a predominantly white market, you need to run your data to understand your statistically significant differences. You may have loan officers who only market to high-end borrowers and give concierge service and not market to low-income borrowers.
Yes, this can happen to you. No matter how small or large your financial institution is. It’s easy to brush it off as there are other projects that need your overworked resources, especially now. Look at the settlements and reputational risk and decide if the risk is worth it. Redlining is still here. NPR stated there are racial covenants that still exist in almost all 50 states that are hard to erase. Don’t get caught up in complacency. Create your robust compliance plan now.
Julie Piepho, CMB, is a Principal Consultant with BlackFin Group in the Mortgage Strategy Practice. Julie is nationally recognized as a Mortgage Strategy Consulting expert with over four decades’ experience leading and coaching sales and operations teams while in executive roles at Cornerstone Mortgage, Norwest Mortgage and Wells Fargo Mortgage. She holds the prestigious Master Certified Mortgage Banker designation from the Mortgage Bankers Association. For more information on how we can help contact info@blackfin-group.com