Since launching an initiative to combat redlining in 2021, federal prosecutors have reached settlements with 13 mortgage lenders totaling more than $137 million.
Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
A New Jersey-based lender accused of closing branches in minority neighborhoods operated by two rivals it acquired has agreed to pay $15.1 million to settle federal redlining allegations.
OceanFirst Bank’s acquisitions of Sun National Bank in 2018 and Two River Community in 2020 attracted the attention of federal regulators and the Department of Justice, which launched a nationwide anti-redlining initiative in 2021.
In its complaint, the Justice Department noted that before those acquisitions, OceanFirst mostly operated in predominantly white communities in Ocean and Monmouth counties.
In the process of expanding, OceanFirst acquired 45 branches and loan production offices — and by 2022 had closed all four of its new branches that were located in majority-Black, Hispanic and Asian neighborhoods, the Department of Justice alleged in its Sept. 18 complaint.
In addition to operating no offices in minority neighborhoods, OceanFirst’s outreach and advertising was disproportionately focused on majority-white communities, contributing to “a pattern or practice of unlawful redlining,” prosecutors alleged.
TAKE THE INMAN INTEL INDEX SURVEY FOR SEPTEMBER
OceanFirst did not immediately respond to a request for comment but said in the consent order that it neither admitted nor denied the allegations against it.
“OceanFirst 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 such as race, color and national origin,” the consent order said. “OceanFirst also asserts that it enters into this settlement solely for the purpose of avoiding contested litigation with the United States, and to instead devote its resources to providing fair and equal access to residential lending services” in the New Brunswick area.
But the Department of Justice alleged that an analysis of Home Mortgage Disclosure Act (HMDA) data showed that from 2018 through 2022, only 1.9 percent of the 4,975 mortgage applications processed by OceanFirst came from people seeking loans on properties located in majority Black, Hispanic or Asian census tracts. That compares to 17.4 percent of applications received by OceanFirst’s peers, the complaint alleged.
“OceanFirst was aware of the inadequacy of its fair lending risk management as early as 2020, when an internal analysis shared with bank leadership stated that the bank’s physical expansion had increased its fair lending risk but that risk management practices had failed to keep pace,” the complaint alleged. “A 2020 internal audit shared with bank leadership identified a lack of customer diversity, deficiencies in the bank’s marketing practices, and inadequate fair lending oversight by the board. ”
In 2021, the bank’s federal regulator, the Office of the Comptroller of the Currency, “concluded that OceanFirst’s fair lending monitoring had failed to keep pace with the bank’s expansion,” the complaint said.
Although the bank created internal committees and groups to address the issues, many recommendations were not followed and others were not implemented “until years after the bank had become aware of the inadequacy of its fair lending risk management,” the complaint said.
In its consent order with the Department of Justice and a conciliation agreement with the Department of Housing and Urban Development (HUD), OceanFirst agreed to:
- Invest at least $14 million in a loan subsidy fund to boost mortgage lending to residents of majority-Black, Hispanic and Asian neighborhoods in Middlesex, Monmouth, and Ocean counties.
- Spend $700,000 on advertising, outreach, consumer financial education and credit counseling focused primarily on Black, Hispanic, and Asian neighborhoods in those counties.
- Spend $400,000 on community partnerships to provide services related to credit, consumer financial education, homeownership, and foreclosure prevention.
- Open a loan production office and maintain the bank’s recently opened full-service branch in predominantly Black, Hispanic and Asian neighborhoods, and assign at least one mortgage loan officer to each location.
- Conduct a community credit needs assessment, evaluate fair lending compliance management systems and conduct staff training on fair lending.
- Hire a director of community lending to oversee mortgage lending in communities of color.
“We are committed to ensuring that everyone in New Jersey has access to the American dream of homeownership, regardless of race, color, or national origin,” Philip Sellinger, U.S. Attorney for the District of New Jersey, said in a statement. “This agreement is an important step in leveling the playing field and removing illegal and discriminatory barriers in residential mortgage lending.”
The Department of Justice said that since launching its Combating Redlining Initiative in 2021, it’s reached settlements with 13 lenders totaling more than $137 million to date, including:
- First National Bank of Pennsylvania, which in February agreed to invest at least $11.75 million in a loan subsidy fund to provide better access to mortgages and home improvement loans to residents of majority-Black and Hispanic neighborhoods in the Charlotte and Winston-Salem, North Carolina, markets.
- 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.
- Newark, Ohio-based Park National Bank, which 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.
- Lakeland Bank, which agreed in September 2022 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, which agreed in July 2022 to invest more than $20 million to create homeownership opportunities in communities of color around Philadelphia.
In announcing the settlement with Ameris Bank last fall, Attorney General Merrick Garland said the Justice Department had over two dozen ongoing investigations into redlining across the country.
Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.