BY Francis Akhalbey, 10:30am October 07, 2022,

New Jersey mortgage lender agrees to pay $13M to settle redlining claims

The Department of Justice accused Lakeland Bank of redlining -- Photo Credit: Cottonbro/Pexels

Lakeland Bank has agreed to pay $13 million to settle the Department of Justice’s claims that the financial institution “engaged in a pattern or practice of lending discrimination” by refusing to offer mortgage lending services to communities of color in three New Jersey counties.

According to CNN, Assistant Attorney General Kristen Clarke said that the Civil Rights Division’s settlement between Lakeland Bank and the DOJ will see the mortgage lender put aside $12 million as a subsidy fund. And going forward, the bank’s mortgage lending services must be structured in such a way that there’s a balanced opportunity for individuals to obtain credit irrespective of where they reside.

“The agreement resolves allegations that Lakeland redlined predominantly Black and Hispanic neighborhoods in the Newark, New Jersey, area,” Clarke said during a news conference on September 28. “This settlement demonstrates our firm commitment to combating modern day redlining and holding banks and other lenders accountable when they denied people of color equal access to lending opportunities.”

The Department of Justice has reportedly embarked on an active clampdown on redlining practices in the United States. Redlining, which is illegal and discriminatory, is a practice where lenders refuse to provide credit services to applicants residing in communities of color because of their race or ethnicity. And besides Lakeland Bank, lenders in Philadelphia, Houston, and Memphis have also reached settlements with the DOJ, CNN reported.

US attorney for the District of New Jersey, Philip Sellinger, said that Lakeland Bank was aware of potentially engaging in redlining since 2015. But the mortgage lender “did nothing” to bring that practice to a stop. Sellinger added that had the bank not engaged in the alleged discriminatory practice, an additional $120 million in loans would have been disbursed.

“There were qualified borrowers in these areas. Lakeland just didn’t service them,” said Sellinger. “Redlining is racist, pure and simple. It has no place in this country,” Sellinger added.

Per a proposed consent order reached between the two parties, Lakeland Bank has agreed to implement a number of changes including the opening of “two new branches in neighborhoods of color, including at least one in the city of Newark,” the DOJ said in a statement

The bank will also ensure that “at least four mortgage loan officers are dedicated to serving all neighborhoods in and around Newark; and employ a full-time Community Development Officer who will oversee the continued development of lending in neighborhoods of color in the Newark area.”

The $12 million loan subsidy fund is also for “residents of Black and Hispanic neighborhoods in the Newark area.”

“Ending redlining is a critical step in our work to close the widening gaps in wealth between communities of color and others,” Kristen Clarke also said in the statement.

“This settlement demonstrates our firm commitment to combating modern day redlining and holding banks and other lenders accountable when they deny people of color equal access to lending opportunities. Through this agreement, we are sending a strong message to the financial industry that we will not stand for discriminatory and unlawful barriers in residential mortgage lending.”

Discriminatory practices

Racial discrimination in the housing system in the United States continues to persist, with Black Americans usually struggling to secure home loans compared to their fellow Whites, The New York Times reported in 2020. The former are also subjected to redlining, where they are denied mortgages in some neighborhoods. This practice further devalues homes in Black neighborhoods. Black homeowners also reportedly claim their properties are usually appraised far less than that of their neighbors in mixed-race and predominantly White neighborhoods.

A 2018 report by researchers at Gallup and the Brookings Institution also shed some light on the devaluation of properties in Black neighborhoods compared to similar homes in White neighborhoods. According to the report: “Owner-occupied homes in black neighborhoods are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative losses.”

Speaking to The New York Times, Andre Perry, one of the writers of the Brookings Institution report, said Black homeowners still continue to bear the brunt of their homes being devalued – irrespective of the neighborhood they find themselves in.

“We still see Black people as risky,” Perry said. “White appraisers carry the same attitudes and beliefs of white America — the same attitudes that compelled Derek Chauvin to kneel casually on the neck of George Floyd are shared by other professionals in other fields. How does that choking out of America look in the appraisal industry? Through very low appraisals.”

A report by Redfin also revealed only 44% of Black Americans managed to own homes in 2020 as compared to 74% of White Americans. President Joe Biden has proposed financial reforms to make it less cumbersome for Black Americans to purchase homes.

Last Edited by:Mildred Europa Taylor Updated: October 7, 2022

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