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A Tennessee-based community bank this week became the 11th lender to reach a settlement with the U.S. Department of Justice over allegations that it avoided making loans in majority-Black and Hispanic neighborhoods in Memphis. In agreeing to pay $1.9 million to resolve the allegations, Patriot Bank denied that it had ever engaged in redlining.
John Smith
“Patriot Bank has always acted to serve the home mortgage credit needs in minority neighborhoods, and the bank’s strong record speaks for itself and flatly contradicts any allegation of wrongdoing,” Patriot Bank President and CEO John Smith said in a statement. “We are proud of our record and strongly deny that Patriot Bank ever avoided originating home mortgage loans in Black and Hispanic areas of the Memphis market.”
In its complaint, the Department of Justice said that from 2015 through at least 2020, Millington-based Patriot Bank located “nearly all its branches and loan production offices and all its mortgage loan officers” into majority-white neighborhoods. Patriot also “concentrated its outreach, advertising, and marketing in majority-white neighborhoods and avoided marketing to majority Black and Hispanic areas,” the government alleged.
As a result, only 7.6 percent of residential mortgage loans Patriot made from 2015 through 2020 were made in majority-Black and Hispanic areas, prosecutors alleged. Competitors in the bank’s peer group “made home loans in majority-Black and Hispanic areas at almost three times the rate of Patriot,” with those neighborhoods accounting for 22.6 percent of their business, the complaint said.
Kristen Clarke
“The Justice Department is dedicated to stamping out discriminatory lending practices across this country and we are vigorously committed to holding lenders accountable, no matter their size,” Assistant Attorney General Kristen Clarke said in a statement. “This settlement will provide many Memphis families with access to credit that will improve the quality of their lives while opening up opportunities to build intergenerational wealth.”
Pending court approval, the consent order will require Patriot to invest $1.9 million to increase credit opportunities for communities of color in Memphis, including:
- At least $1.3 million to be earmarked for a loan subsidy fund aimed at increasing access to home mortgage, home improvement and home refinance for residents of majority-Black and Hispanic neighborhoods
- $375,000 for advertising, outreach, consumer financial education and credit counseling focused on majority-Black and Hispanic neighborhoods
- $225,000 on community partnerships to provide services that increase residential mortgage credit
In addition, the consent order requires Patriot to dedicate at least two mortgage loan officers to serving majority-Black and Hispanic neighborhoods, and employ a director of community lending to oversee the continued development of lending in communities of color.
In its complaint, the Department of Justice said that only two of Patriot’s six branches were located in a majority-Black and Hispanic neighborhood, and none of the bank’s three loan production offices were.
Because Patriot had not assigned any mortgage loan officers to the two branches located in a minority neighborhood, the government alleged that if a would-be homebuyer walked into one of those branches to look into taking out a mortgage, “staff at those branches would refer the prospective applicant to a different Patriot branch location where mortgage support was available over 15 miles away.”
Additionally, Patriot “did not advertise on radio stations specifically targeted to Black and Hispanic communities in the Memphis assessment area until 2020,” prosecutors said.
Patriot’s regulator, the Federal Reserve Board, put the bank on notice in 2015 that its lending practices were creating redlining risk, and in 2019 launched an examination focused on redlining. The examination found evidence that Patriot had engaged in “a pattern or practice of discrimination” in violation of fair lending laws.
After receiving a notification from the Federal Reserve Board in November, 2020, the Department of Justice opened its investigation in January 2021.
Patriot hired a third-party consultant in February 2021 “to conduct a detailed assessment of Patriot’s fair lending compliance management system,” the consent order notes. Based on the assessment, in April 2021 the bank established formal policies for siting branches with fair lending in mind, conducting fair lending training for loan officers and marketing to minority census tracts.
The bank had previously opened a third full-service branch in a majority-Black and Hispanic census tract, in the City of Memphis, and hired an economist to conduct annual monitoring of mortgage underwriting, pricing, steering, and redlining risk, and an annual fair lending monitoring plan.
Patriot claims that in 2021, it ranked 14th out of 482 lenders in making mortgage loans in minority areas of Memphis, and 15th out of 534 lenders in 2022.
“As one of the top mortgage lenders to minority areas in the Memphis market, the bank does not understand why the [Department of Justice] has pursued this matter,” Patriot Bank said in a statement. “The bank entered into a consent order with the DOJ because the terms of the agreement affirm and adopt the programs and actions that the bank has already been implementing on its own for many years to help meet mortgage credit needs in the communities it serves, including its investment of $1.9 million in reaching and serving communities of color, as the consent order itself states.”
Since announcing a Combating Redlining Initiative in October 2021, the Department of Justice has reached settlements totaling more than $109 million with 11 lenders, including:
- Jacksonville, Florida-based Ameris Bank, which agreed in October 2023 to a $9 million settlement aimed at improving access to credit in majority-Black and Hispanic neighborhoods.
- The Washington Trust Company, agreed in September 2023 to invest and spend at least $9 million to improve access to mortgage credit in minority neighborhoods in Rhode Island.
- Newark, Ohio-based Park National Bank agreed in February 2023 to invest at least $7.75 million in a loan subsidy fund to increase access to credit in majority-Black and Hispanic neighborhoods in the Columbus area.
- In what was touted as the biggest redlining settlement ever reached by the Department of Justice, City National Bank in January 2023 agreed to invest at least $31 million in majority-Black and Hispanic neighborhoods in Los Angeles County.
- Lakeland Bank in September 2022 agreed to invest at least $12 million in a loan subsidy fund for residents of Black and Hispanic neighborhoods in the Newark, New Jersey metropolitan area, including neighborhoods in Essex, Somerset and Union counties.
- Berkshire Hathaway-owned Trident Mortgage Company in July 2022 agreed to invest more than $20 million to create home ownership opportunities in communities of color around Philadelphia.
In announcing the settlement with Ameris Bank, Attorney General Merrick Garland said the Justice Department had over two dozen ongoing investigations into redlining across the country.
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