In this post, we’re going to examine the subject of redlining in the context of residential mortgage loans. We’re then going to turn our attention to the recent joint action by the Consumer Financial Protection Bureau (“CFPB”) and the Department of Justice (“DOJ”) against Hudson City Savings Bank for alleged redlining practices. Lenders need to know about the Hudson City case because, 1) it is a recent case, filed this past September, meaning redlining enforcement cases are alive and well, 2), the Hudson City case resulted in the largest residential mortgage redlining settlement in history, and 3) the DOJ and the CFPB have made it clear that they plan to stay on the lookout for redlining violations by lenders.1 Additionally, as we’ll see in the Hudson City case, a redlining case can come at a considerable cost to a lender, even if the lender does not admit to redlining violations and the lender reaches settlement early on. Let’s start by looking at redlining broadly. At the risk of oversimplifying, redlining, in a very general sense, is the practice of denying or limiting goods and services to residents of a certain geographic area because the residents’ geographic area is largely populated by a particular minority group (or minority groups). Another way to think of it: Imagine a lender or other type of service company drawing a red line around a certain community or neighborhood on a map, because of the community’s or neighborhood’s racial makeup, and then avoiding doing business with residents of that particular community / neighborhood. That actually used to be a routine—and government sanctioned--practice as we’ll see below. For an understanding of redlining in the context of residential mortgage loans, it’s useful to start by looking at the Fair Housing Act and the Equal Credit Opportunity Act, because it’s through these two Acts that the government pursues actions against mortgage lenders for redlining. “The Fair Housing Act…which is title VIII of the Civil Rights Act of 1968, as amended (42 USC 3601 et seq.), makes it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap, or familial status. Anyone who is in the business of providing housing-related loans is subject to the [Fair Housing Act] (as well as the Equal Credit Opportunity Act).”2 The Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) “prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act.”3 And redlining—in the context of residential mortgages—“is the practice of denying a creditworthy applicant a loan for housing in a certain neighborhood even though the applicant may otherwise be eligible for the loan. The term refers to the presumed practice of mortgage lenders of drawing red lines around portions of a map to indicate areas or neighborhoods in which they do not want to make loans.”4 For historical context, the practice of redlining was essentially institutionalized by the federal government in the 1930s before being outlawed by the Fair Housing Act in 1968. Yes, you heard that right, the federal government not only sanctioned but effectively institutionalized redlining in the 30s, contributing to its widespread use in the private sector by lenders. Here’s how it happened: The Home Owners’ Loan Corporation had been created as part of the New Deal during the Great Depression to refinance mortgages in default to avoid foreclosure. The Federal Home Loan Bank Board (the agency with oversight of Federally chartered Savings & Loan associations), asked the Home Owners’ Loan Corporation to examine certain cities and “create "residential security maps" to indicate the level of security for real-estate investments in each surveyed city. Such maps defined many minority neighborhoods in cities as ineligible to receive financing. The maps were based on assumptions about the community, not accurate assessments of an individual's or household's ability to satisfy standard lending criteria. Since African Americans were unwelcome in white neighborhoods, which frequently instituted racial restrictive covenants to keep them out, the policy effectively meant that blacks could not secure mortgage loans at all. At various times the practice also affected other ethnic groups, including Jews, Latinos, and Asians.”5 In her 5/28/15 Washington Post article on redlining, Emily Badger discusses these origins of redlining and its impact, noting that redlining “has particular roots in the 1930s, when the government-sponsored Home Owner's Loan Corporation first drafted maps of American communities to sort through which ones were worthy of mortgage lending. Neighborhoods were ranked and color-coded, and the D-rated ones — shunned for their "inharmonious" racial groups — were typically outlined in red…This government practice was swiftly adopted by private banks, too, during an era of massive homeownership expansion in the U.S. And the visual language of the maps became a verb: To redline a community was to cut it off from essential capital.”6 In sum, this practice of redlining, sanctioned and in fact encouraged by the federal government in the 1930s, flourished for over three decades before being outlawed by the Fair Housing Act and the Equal Credit Opportunity Act, and it’s not a stretch to recognize that this practice—when coupled with racial restrictive covenants (which were also outlawed by the Fair Housing Act)—presented a hurdle to early initiatives in the 50s and 60s to address the issue of segregation in general. Let’s turn our attention to the Hudson City Savings Bank case. We’ll start by looking at the bank itself and its holding company, Hudson City Bancorp, Inc. (“Hudson City Bancorp”). Hudson City Bancorp is based in Paramus, New Jersey, and Hudson City Savings Bank is its only subsidiary.7 According to a 9/30/15 Federal Reserve Board Order authorizing the merger between Hudson City Bankcorp and M&T Bank, Hudson City Bancorp “…with consolidated assets of approximately $35.4 billion, is the 49th largest insured depository organization in the United States, controlling deposits of approximately $18.2 billion…[Hudson City Bancorp] controls Hudson City Savings Bank, which operates in Connecticut, New Jersey, and New York. Hudson City Savings Bank is the fifth largest insured depository institution in New Jersey with approximately $16.5 billion in deposits, which represent 5.8 percent of the total deposits of insured depository institutions in that state. In addition, Hudson City Savings Bank is the 35th largest insured depository institution in New York with approximately $3.1 billion in deposits, and the 16th largest insured depository institution in Connecticut with approximately $1.0 billion in deposits…”8 As for Hudson City Bancorp’s merger with and acquisition by M&T Bank mentioned above, its effort to merge with M&T Bank has taken over three years. According to an Oct. 1, 2015 New York Times DealBook article, “[i]t’s the bank merger that has taken longer to consummate than any other in United States history…the Federal Reserve finally approved the takeover of Hudson City Bancorp by the New York lender M&T Bank, three years, one month and three days after the deal was first announced.”9 The merger—with M&T Bank to acquire Hudson City Bancorp--was scheduled to be completed this past November 1st.10 Based on a November 2 press release from M&T Bank, its acquisition of Hudson City Bancorp is now complete.11 OK, so we know something about Hudson City Savings Bank in terms of its size, its geographic footprint, and its recent history relating to the M&T Bank merger. Now let’s look at the CFPB’s and DOJ’s case against Hudson City Savings Bank. The Complaint, naming the Consumer Financial Protection Bureau and the United States of America as joint plaintiffs, and Hudson City Savings Bank, F.S.B. as defendant, was filed in the U.S. District Court for the District of New Jersey on September 24, 2015.12 In the opening paragraph of the Introduction section of the Complaint, the CFPB and DOJ state that the action was brought against Hudson City Savings Bank “under the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. §§ 1691-1691f, and the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601-3619, for engaging in a pattern or practice of unlawful redlining by structuring its business so as to avoid the credit needs of majority-Black-and-Hispanic neighborhoods in its residential mortgage lending, and thereby engaging in acts or practices directed at prospective applicants that discouraged applicants in these neighborhoods from applying for credit.”13 The CFPB and DOJ discuss Hudson City Savings Bank’s alleged redlining practice within the context of Hudson City’s geographic footprint in paragraph 4 of the Complaint as follows: “Hudson City engaged in unlawful redlining throughout its lending footprint by discouraging applicants in majority-Black-and-Hispanic neighborhoods in at least three Metropolitan Statistical Areas (“MSAs”): New York-Northern New Jersey Long Island, NY-NJ-PA (“NY/NJ MSA”), Philadelphia-Camden-Wilmington, PA-NJ-DE (“Camden MSA”), and Bridgeport-Stamford-Norwalk, CT (“Bridgeport MSA”). Hudson City generates the vast majority of its mortgage loan applications for properties within these three MSAs.1 In 2012, for example, Hudson City drew over 90 percent of its mortgage loan applications for properties within these three MSAs…”14 This is a very urban footprint, one of the most densely populated areas of the county, and includes diverse communities. The following are selected sections [paraphrased] of the factual allegations from the Complaint that led to the CFPB and DOJ bringing their action against Hudson City Savings Bank:
- “Hudson City engaged in unlawful redlining by structuring its business so as to avoid majority-Black-and-Hispanic neighborhoods in the NY/NJ, Camden, and Bridgeport MSAs from at least 2009-2013 (“the relevant time period”), and thereby engaging in acts or practices directed at prospective applicants that discouraged applicants in these majority-Black-and-Hispanic neighborhoods from applying for credit…
Branch and Broker Locations
- Hudson City originated approximately 43,257 mortgage loans during the relevant time period. Hudson City generated approximately 80 percent of its mortgage loan applications through mortgage brokers and 20 percent through its branch network and retail loan officers.
- Hudson City concentrated its branches so as to serve the credit needs in areas outside of, and avoid lending in, majority-Black-and-Hispanic areas.
- Hudson City currently operates 135 branches. Based on 2010 census data, 121 (89.6 percent) of these branches were located outside of majority-Black-and-Hispanic areas.
- From 2004 through 2010, Hudson City expanded its presence outside of New Jersey by embarking on a “branch expansion and acquisition strategy.” To carry out this expansion, Hudson City’s management provided direction to explore new markets in Staten Island, Long Island, Connecticut, and parts of New York State north of New York City. These areas exclude and form a semi-circle around the four counties Case 2:15-cv-07056-CCC-JBC Document 1 Filed 09/24/15 Page 6 of 20 PageID: 6 7 in New York State with the highest proportions of majority-Black-and-Hispanic neighborhoods: Queens, Kings, Bronx, and New York Counties.
- Between 2004 and 2010, Hudson City opened or acquired 54 branches, and has not opened a branch since. Based on 2000 census data, 51 (94.4 percent) of these branches were outside of majority-Black-and-Hispanic areas. Based on 2010 census data, 50 (92.6 percent) of these branches were located outside of majority-Blackand-Hispanic areas.
- Hudson City concentrated its broker network so as to serve the credit needs in areas outside of, and avoid lending in, majority-Black-and-Hispanic areas.
- Based on 2010 census data, 94.5 percent of all office locations of Hudson City’s purported top 50 brokers by loan volume in 2011 and 2012 were located outside of majority-Black-and-Hispanic areas.
- From 2011 to 2013, only 3.7 percent of the applications generated by brokers came from majority-Black-and-Hispanic areas…
CRA Assessment Area
- Hudson City discouraged lending in majority-Black-and-Hispanic neighborhoods by excluding most of the majority-Black-and-Hispanic neighborhoods in the NY/NJ and Camden MSAs from its Community Reinvestment Act (“CRA”) assessment areas.
- Congress enacted the CRA to encourage financial institutions to “help meet the credit needs of the local communities in which they are chartered.” 12 U.S.C. § 2901(b). The CRA serves as an important safeguard for minority neighborhoods that have been traditionally underserved by creditors.
- Under implementing regulations promulgated by the Office of the Comptroller of the Currency (“OCC”), a bank must “delineate one or more assessment areas within which the OCC evaluates the bank’s record of helping to meet the credit needs of its community.” 12 C.F.R. § 25.41(a). In other words, the CRA and its implementing regulations required Hudson City to select the geographic boundaries of “its community” whose credit needs it would help to meet, called an “assessment area.”
- From September 2011 at least through the relevant time period, the Bank included six whole counties in New York State in its assessment area: Suffolk, Putnam, Richmond, Rockland, Westchester, and Nassau.
- This assessment area in New York State excludes and forms a semi-circle around the four counties with the highest proportion of majority-Black-and-Hispanic neighborhoods in the State: Bronx (which consists only of the New York City borough the Bronx), Queens (which consists only of the New York City borough Queens), Kings (which consists only of the New York City borough Brooklyn), and New York (which consists only of the New York City borough Manhattan) counties.
- Twenty percent of the census tracts in the six New York State counties included in the Bank’s assessment area are majority-Black-and-Hispanic, while 50 percent of the census tracts in the four excluded counties are majority-Black-and Hispanic. By excluding these four counties, the Bank has excluded 63.4 percent of the majority-Black-and-Hispanic census tracts in the NY/NJ MSA from its assessment area, while excluding only 37.1 percent of the tracts that are not majority-Black-and-Hispanic.
- Hudson City excluded Bronx, Queens, Kings, and New York counties despite generating virtually the same number of applications from them (concentrated outside of the majority-Black-and-Hispanic neighborhoods in those counties) on an annual basis as it did from all of Long Island (Suffolk and Nassau counties), one of Hudson City’s most active lending areas.
- Hudson City’s assessment area in the Camden MSA excludes all 337 majority-Black-and-Hispanic census tracts. Hudson City accomplished this by excluding specific tracts in New Jersey and all counties in Pennsylvania from its assessment area. In doing so, Hudson City excluded the heavily Black and Hispanic cities of Camden (48.1 percent Black and 44.4 percent Hispanic) and Philadelphia (43.4 percent Black and 11.3 percent Hispanic).
- This pattern of excluding from its assessment areas more heavily Black and Hispanic urban areas occurred outside of the NY/NJ and Camden MSAs as well…
- Hudson City engaged in limited marketing outside of its branch network, and therefore failed to advertise meaningfully in majority-Black-and-Hispanic neighborhoods.
Applications from Majority-Black-and-Hispanic Neighborhoods
- From at least 2009 to 2013, the Bank’s policies and practices directed at prospective applicants, including but not limited to its branch and broker locations, assessment area delineation, and marketing practices have discouraged prospective applicants in majority-Black-and-Hispanic neighborhoods and resulted in relatively few mortgage loan applications from majority-Black-and-Hispanic neighborhoods in the NY/NJ, Camden, and Bridgeport MSAs.
- Analysis of Hudson City’s mortgage applications in these MSAs as compared to its peers showed disparities in lending to majority-Black-and-Hispanic neighborhoods between Hudson City and its peers…These disparities further show that Hudson City had no legitimate, non-discriminatory reason to draw relatively few applications from these majority-Black-and-Hispanic areas.
- While Hudson City drew only 1.5 percent of its applications from census tracts in the NY/NJ MSA in which more than 80 percent of the residents are identified in the U.S. Census as either “Black or African American” or “Hispanic or Latino” (highBlack-and-Hispanic areas) during the relevant time period, the Bank’s peers generated 6.6 percent – 4.5 times that of Hudson City.
- During the relevant time period, Hudson City drew 4,243 mortgage loan applications in the Camden MSA. Only 34 (0.8 percent) were from majority-Black-and Hispanic areas, even though 22.6 percent of the MSA’s tracts are majority-Black-and Hispanic.
Failure to monitor for redlining
- Throughout the relevant time period, Hudson City failed to exercise adequate oversight or hire sufficient staff to ensure compliance with its fair lending obligations.
- Hudson City’s fair lending policy consisted only of a statement asserting that it is an equal opportunity lender. The Bank employed no written policies or procedures to monitor for compliance with its fair lending obligations.
- Throughout the relevant time period and to-date, Hudson City did not monitor its brokers for redlining. In 2012, the Bureau recommended that Hudson City begin monitoring at least its top 10 brokers by loan volume; Hudson City failed to do so.
- In 2009 and 2010, Hudson City employed only one compliance officer.
- In sum, the totality of Hudson City’s policies and practices described herein constitutes the redlining of majority-Black-and-Hispanic areas of the NY/NJ, Camden, and Bridgeport MSAs. Hudson City’s policies and practices are intended to deny and discourage, or have the effect of denying or discouraging, an equal opportunity to the residents of the majority-Black-and-Hispanic areasof the NY/NJ, Camden, and Bridgeport MSAs, on the basis of the racial and ethnic composition of those neighborhoods, to obtain residential mortgage loans. These policies and practices are not justified by business necessity or legitimate business considerations.”15
The proposed Consent Order, signed by counsel for the DOJ, the CFPB, and Hudson City, was filed with the parties’ joint motion for entry on September 24, 2015, the same day the Complaint was filed. The Judge signed the Consent Order on November 4, 2015 (with no changes to the Order) and the case was terminated that day. It should be noted that Hudson City did not file an Answer in which it admitted the allegations in the CFPB’s and the DOJ’s Complaint. The Consent Order provides in the Introduction portion of the Order as follows: “There has been no factual finding or adjudication with respect to any matter alleged by Plaintiffs. The execution of this Order is neither an admission nor denial by Defendant of any violation of the FHA or ECOA by Hudson City.”16 Separately, the Order contains a section with the heading “Position of Defendant” which provides as follows:
“Hudson City asserts that throughout the period of time at issue in this proceeding and to the present, it has treated all of its customers fairly and without regard to impermissible factors 3 such as race and national origin. Hudson City believed that it was satisfying its obligations to meet the credit needs of majority-Black-and-Hispanic neighborhoods by purchasing from other lenders FHA-guaranteed mortgages that were secured by residential properties in majorityBlack-and-Hispanic neighborhoods. Hudson City enters this settlement solely for the purpose of avoiding contested litigation with the United States and the Bureau, and to instead devote its resources to providing fair credit services to eligible persons, and to providing important and meaningful assistance to borrowers in certain markets.”17
The Consent Order, like most consent orders in which the CFPB is the plaintiff (or one of the plaintiffs), is one part remediation and one part penalty. The mandates of the Consent Order relating to remedial action are extensive and require significant investment on the part of Hudson City, meaning the civil penalty portion of the Consent Order isn’t the only part of the Order that hits Hudson City’s pocketbook. The following are sections [paraphrased] from the Terms of the Consent Order that are remedial in nature:
“A. Nondiscrimination Injunction:
Defendant, including all of its officers, employees, agents, representatives, assignees, and successors in interest, and all those in active concert or participation with any of them, is hereby enjoined from engaging in any act or practice in the Affected MSAs that discriminates on the basis of race, color, or national origin that (a) violates ECOA in any aspect of a credit transaction, or (b) violates the FHA in any aspect of a residential real-estate related transaction.
B. Fair Lending and Compliance Training:
Within 60 days of the Effective Date, Defendant must identify’ an independent third-party compliance-management-system consultant (“CMS Consultant”), subject to Plaintiffs’ Non-objection, to assist in the review and revision as necessary of Defendant’s compliance management system with respect to redlining. Within 90 days of notification of Plaintiffs’ Non-objection to Defendant’s contract with the CMS Consultant, Defendant must submit to Plaintiffs a detailed written report by the CMS Consultant describing the Defendant’s fair lending compliance management system, weaknesses in the system, and recommendations to strengthen the system to ensure that Defendant complies with ECOA and the FHA with respect to redlining prohibitions.
Unless otherwise specified…Defendant will submit a written compliance plan (“Compliance Plan”) to Plaintiffs…The Compliance Plan will include, at least:
- Steps to effectively and promptly revise all of Defendant’s mortgage lending policies and practices that pose redlining risks…
- Adoption of a written policy and procedures regarding Defendant’s selection and oversight of its mortgage brokers to address redlining risk…
- Fair lending training…
- A formal process for ongoing statistical monitoring for redlining risk, including statistical peer analysis of applications and originations from majority-Black and-Hispanic neighborhoods and census tracts with relatively high concentrations of Black and Hispanic residents.
Within 120 days of the Effective Date, Defendant will hire or designate a dedicated Fair Lending Officer who will report directly to Defendant’s Chief Compliance Officer and whose primary responsibilities will include ensuring Defendant’s compliance with its fair lending obligations in the Affected MSAs, implementing the Compliance Plan, and ensuring compliance with this Order.
Within 180 days of the Effective Date, Defendant will provide training to all Covered Employees to ensure that their activities are conducted in a nondiscriminatory manner. This training will address Defendant’s obligations under the ECOA and FHA and Defendant’s responsibilities under this Order, and may be conducted by webinar or interactive web-based training programs. The training must require employees to verify participation and demonstrate proficiency. Defendant will provide this fair lending training annually to Covered Employees…
C. Community Reinvestment Act:
Subject to any applicable approval of the appropriate regulator, within 30 days of the Effective Date, Defendant will revise its CRA assessment areas to include all of Bronx, Kings, Queens, and New York counties in New York State, the city of Camden, NJ, and the city of Philadelphia, PA. Defendant must not eliminate majority-Black-and-Hispanic areas from its CRA assessment area throughout the term of this Order…
D. Credit Needs Assessment and Remediation Plan:
Within 60 days of the Effective Date, Defendant will propose an independent third-party credit-needs-assessment consultant (“CNA Consultant”) to begin an assessment of the credit needs of majority-Black-and-Hispanic neighborhoods within the Affected MSAs… Within 120 days of the Effective Date, Defendant will hire or designate a fulltime Director of Community Lending. For the duration of this Order, the Director of Community Lending will have primary responsibility for overseeing the continued development of Defendant’s lending in majority-Black-and-Hispanic neighborhoods within the Affected MSAs consistent with the action steps contained in the Remedial Plan…
E. Physical Expansion to Serve Black and Hispanic Neighborhoods:
Subject to any applicable approval of the appropriate regulator, Defendant will open or acquire two new full-service branches located within majority-Black-and-Hispanic neighborhoods in the Affected MSAs…
F. Loan Subsidy Program:
Defendant will invest $25,000,000 in a Loan Subsidy Program to increase the credit that Defendant extends in majority-Black-and-Hispanic neighborhoods in the Affected MSAs to remedy its alleged redlining (“Loan Subsidy Program”). The Loan Subsidy Program will offer residents in majority-Black-and-Hispanic neighborhoods in the Affected MSAs home mortgage loans on a more affordable basis than otherwise available from Defendant…
G. Advertising and Outreach:
Defendant will spend a minimum of $200,000 per year on the targeted advertising and outreach campaign…
H. Consumer Financial Education:
Defendant will spend a minimum of $100,000 per year on…consumer financial education programs that will help identify and develop qualified loan applicants from majority-Black-and-Hispanic neighborhoods in the Affected MSAs within Defendant’s revised CRA assessment areas…
I. Community Development Partnership Program:
Defendant will partner with one or more community-based organizations or governmental organizations that provide (1) home repair or other grants designed to assist homeowners who experience financial distress or deferred maintenance on their properties, or (2) credit, financial, homeownership, or foreclosure prevention services, in either case to the residents of majority-Black-and-Hispanic neighborhoods in the Affected MSAs. Defendant will develop such partnerships in a manner consistent with achieving the remedial goals of this Order; specifically, Defendant will form partnerships with organizations that will aid it in establishing a physical presence in majority-Black-and-Hispanic neighborhoods in the Affected MSAs…Defendant must spend a minimum of $750,000 on these partnerships.”18
In addition to the above “remedial” sections, which, as already noted, requires significant investment on the part of Hudson City, there’s also a “Civil Monetary Penalties” section which provides that “…Defendant must pay a civil money penalty of $5,500,000 to the Bureau.”19 Keep in mind that Hudson City is already required to invest $25,000,000 in a Loan Subsidy Program to increase the credit that it extends in majority-Black-and-Hispanic neighborhoods in the Affected MSAs, plus open two new full-service branches located within majority-Black-and-Hispanic neighborhoods in the Affected MSAs. Not to mention the amounts it must invest in advertising and outreach, consumer financial education, hiring a dedicated “Fair Lending Officer,” and partnering with community-based organizations. Later sections of the Consent Order address the application of the Consent Order in the event that the merger with M&T Bank is consummated (which it was, just before the Consent Order was entered).20 Here are four big points lenders will want to take away from the Hudson City case:
- Evidence of redlining does not have to be overt to attract the attention of the CFPB and the DOJ. The CFPB and the DOC are, after all, looking for geographic presence and peer comparisons to support their claims of redlining, they’re not expecting or waiting for lenders to admit violations in deposition testimony.
- The DOJ has made it clear that they’re going to continue to be on the lookout for lenders engaged in redlining practices—that the Hudson City case should serve as an example. Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division at the DOJ, stated the following: “This case should send a message to lenders throughout the country that the Justice Department will not tolerate racial discrimination in the extension of credit.”21
- Claims of redlining by the CFPB and the DOJ do not have to be based on findings of conscious and deliberate actions on the part of lenders to result. Meaning that lenders can find themselves accused of redlining when they are simply focusing on the geographic markets that, to them, present the best lending opportunities. So to avoid such a situation, the onus is on lenders to be proactive in reaching out to and working with, and in, neighborhoods and communities in their assessment areas that they might otherwise have bypassed (if those communities have large populations of protected classes). That’s easy enough to say, of course, because taking these steps will require an investment of time and resources on the part of lenders.
- The analysis does not end with the application and mortgage lending process. One important question that has been raised is whether loss mitigation efforts are subject to scrutiny for relining; namely, whether claims for relining can be made against a lender when it appears the lender is being less accommodating to delinquent borrowers from a certain geographic area (with a certain racial makeup) when compared to the lender’s dealings with delinquent borrowers generally.
Redlining is a complicated claim to prove against a lender, but theDOJ and theCFPB have the resources and the stated desire to pursue these types of claims. The thing about regulatory compliance enforcement cases is, once a government agency has successfully prosecuted or settled one, it has a model to facilitate the prosecution of subsequent, similar cases. So I expect we’re going to see more of these cases in the monthsahead—theDOJ and theCFPB have as much as said this. And I don’t think it’s a stretch to assume that lenders will be getting scrutinized for redlining on both the front end (the application process) and the back end (the loss mitigation process).