Bank accused of widespread redlining pays $13M settlement

Feds say Lakeland Bank repeatedly denied mortgages to applicants in Black and Latino neighborhoods

Lakeland Bank will pay a $13 million settlement after the U.S. Justice Department said the lender for years denied mortgages to applicants seeking to buy homes in Black and Latino neighborhoods in the Newark, New Jersey, metropolitan area.

After a year-long investigation, federal prosecutors announced this week that Lakeland Bank decided not to challenge a federal discrimination lawsuit.

That complaint accused the 53-year-old lender of redlining, after federal officials found that Lakeland Bank engaged in a “pattern of practice” of denying mortgages in Black and Latino neighborhoods in a metropolitan area it shares with New York City of nearly 20 million people.

Federal investigators also said all of Lakeland Bank’s branches were located in majority-white neighborhoods, and that its loan officers did not serve the credit needs of Black and Hispanic neighborhoods in and around Newark.

Federal officials did not say how many applicants were denied mortgages but said the alleged practice occurred between 2015 to 2021.

“Financial institutions that refuse to provide mortgage lending services to communities of color not only contribute to the persistent racial wealth gap that exists in this country, but also violate federal law,” Attorney General Merrick B. Garland said.

“The agreement with Lakeland announced today represents the Justice Department’s continued commitment to addressing modern-day redlining, and to ensuring that all Americans have equal opportunity to obtain credit, no matter their race or national origin.”

Redlining is an illegal and discriminatory practice in which lenders deny mortgages and credit services to applicants living in Black and minority neighborhoods.

During President Franklin D. Roosevelt’s administration, the U.S. government engaged in redlining in cities across the country through its Federal Housing Administration (FHA), which was established by the National Housing Act of 1934.

The widespread practice accelerated the decline and decay of inner-city neighborhoods and made it difficult to attract and keep Black homeowners.

The practice created a housing crisis in Chicago as the Black population exploded during the Great Migration. Chicago’s late pioneering real estate mogul Demsey Travis, along with the defunct Seaway Bank, provided thousands of mortgages to Blacks who had been denied home loans by white banks.

In 2015, Associated Bank paid a $200 million settlement after a three-year investigation by the U.S. Department of Housing and Urban Development concluded that the lender purposely rejected mortgage applications from Black and Latino residents. The settlement forced Associated Bank to open branches in Black and minority neighborhoods.

In the case against Lakeland Bank, the lender agreed to a consent order as part of the settlement.

Under the proposed consent order, which is subject to court approval by the U.S. District Court for the District of New Jersey, Lakeland has agreed to:

• Invest at least $12 million in a loan subsidy fund for residents of Black and Hispanic neighborhoods in the Newark area; $750,000 for advertising, outreach and consumer education; and $400,000 for development of community partnerships to provide services that increase access to residential mortgage credit.

• Open two new branches in neighborhoods of color, including at least one in the city of Newark; ensure 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.

• Maintain an expanded Community Reinvestment Act Assessment Area that includes Essex, Somerset and Union counties.

“Redlining creates an unequal playing field that unfairly prevents many persons of color from achieving the dream of home ownership, and this type of systemic and intentional discrimination cannot and will not be tolerated,” U.S. Attorney Philip R. Sellinger said.

“It is wholly unacceptable that redlining persists into the 21st century, and this case demonstrates our commitment to combatting redlining and hold banks and others accountable when they engage in unlawful discrimination. Through this agreement, we are taking a major step forward by removing unlawful and discriminatory barriers in residential mortgage lending.”

In October 2021, Attorney General Garland launched the Justice Department’s Combatting Redlining Initiative, which aims to address systemic discrimination against Black and minority communities. Since the initiative was launched, the department has announced four redlining cases and settlements with a combined $38 million in relief for communities that have been the victims of lending discrimination. This includes the $20 million settlement with Trident Mortgage Company, the second largest settlement in Justice Department history.

Individuals may report lending discrimination by calling the Justice Department’s housing discrimination tip line at 1-833-591-0291, or submitting a report online. Individuals may also report civil rights violations through https://www.justice.gov/usao-nj/civil-rights-enforcement or may call the U.S. Attorney’s Civil Rights Hotline at (855) 281-3339.