The Department of Justice (DOJ) announced on Oct. 22 a new initiative to combat what United States Attorney General Merrick Garland is calling “modern day redlining,” investigating discriminatory practices by mortgage lenders across the country that exclude people of color in violation of federal law.
The new program—Combatting Redlining Initiative—will run through the DOJ’s Civil Rights Division’s Housing and Civil Enforcement Section. It was announced alongside a settlement with Trustmark National Bank, which agreed to pay a $5 million fine and invest another $4.5 million in Black and Hispanic neighborhoods in Memphis, Tennessee, after being accused of systematic avoidance of those communities in its lending practices.
“Enforcement of our fair lending laws is critical to ensure that banks and lenders are providing communities of color equal access to lending opportunities,” said Assistant Attorney General Kristen Clarke for the Justice Department’s Civil Rights Division. “Equal and fair access to mortgage lending opportunities is the cornerstone on which families and communities can build wealth in our country. We know well that redlining is not a problem from a bygone era but a practice that remains pervasive in the lending industry today.”
Lawsuits and investigations from Connecticut to Indiana to California have accused lenders of perpetuating the practice of redlining, which started in the 1930s with the federal government refusing to insure mortgages in Black neighborhoods and was picked up by private lenders and other policymakers. These banks have often declined to admit wrongdoing but also agreed to change their lending practices and pay hefty fines.
The new DOJ initiative will aim to further scrutinize these institutions and sniff out potential violations of the law, working with states and financial regulatory agencies, according to the release. It will also place a new emphasis on investigating so-called non-depository lenders—financial institutions that do not qualify as traditional banks which now handle a majority of mortgages, the DOJ said.
Other DOJ resources will also be leveraged as “force multipliers to ensure that fair lending enforcement is informed by local expertise on housing markets and the credit needs of local communities of color,” the release stated.
“We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit,” Garland said in a statement.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com.
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