In recognition of National Homeownership Month, the NCUA is hosting a webinar to discuss federal government efforts to combat bias in home valuations and increase opportunities for homeownership. The webinar will also provide information about relevant resources available for consumers and credit union professionals.
The webinar is titled “Expanding Homeownership Opportunities by Combating Appraisal Bias” and will be held on Wednesday, June 21 at 1 p.m. Eastern.
Panelists include:
- Shameka Sutton, Special Assistant to the Executive Director, NCUA
- James Park, Executive Director, Federal Financial Institutions Examination Council’s Appraisal Subcommittee
- James Wylie, Associate Director for Fair Lending, Federal Housing Finance Agency
- David Berenbaum, Deputy Assistant Secretary for Housing Counseling, U.S. Department of Housing and Urban Affairs
Victoria Nahrwold, NCUA’s Associate Director for the Office of Examination and Insurance, will provide opening remarks. Ashley Gordon, NCUA’s Financial Literacy and Outreach Program Officer, will moderate the event.
Registration for this 60-minute webinar is now open.
Dive Brief:
- Stroudsburg, Pennsylvania-based ESSA Bank & Trust will pay more than $3 million to settle redlining allegations, the Justice Department announced Wednesday.
- The bank, between 2017 and 2021, “failed to provide mortgage lending services and did not serve the credit needs of majority-Black and Hispanic neighborhoods” in and around Philadelphia, the DOJ said in a complaint filed Wednesday in federal court.
- In a statement, ESSA President Gary Olson called the settlement a “constructive resolution to a dispute that has lasted several years.” Olson challenged the findings, however, saying ESSA “did not receive a single fair lending complaint from any customer or potential customer” in the years covered by the investigation. He added that ESSA opened a branch in a majority-nonwhite census tract in Allentown in 2018.
Dive Insight:
Wednesday’s settlement with ESSA marks the seventh redlining-related resolution the DOJ has reached since launching a coordinated effort in late 2021 to fight lending discrimination alongside the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. The Federal Deposit Insurance Corp. brought the ESSA allegations to the DOJ in June 2022, and the department launched an investigation in August.
As part of the settlement, ESSA agreed to invest at least $2.92 million in a loan subsidy fund meant to increase access to credit for home mortgages, improvement and refinancing in majority-Black and Hispanic neighborhoods in the bank’s lending area.
At least half of that investment must be used for consumers applying for loans in majority-Black and Hispanic census tracts within a five-mile radius of the bank’s Upper Darby and Lansdowne branches, according to a court order.
The bank also agreed to spend $125,000 on community partnerships and $250,000 on advertising, outreach, consumer financial education and credit counseling targeting majority-Black and Hispanic communities.
ESSA must also hire two new mortgage loan officers to serve its branches in West Philadelphia and conduct a research-based market study to help identify financial services needs in communities of color. The settlement’s requirements will remain in effect for five years.
“While vehemently denying the government’s allegations of redlining, we have cooperated expeditiously and fully with the investigation into this matter,” Olson said. “This settlement reflects our business decision to avoid the costs, uncertainties and distractions of litigation.”
The settlement “is consistent with our guiding principles and longstanding commitment to provide equal lending opportunities to all of the communities we are privileged to serve,” Olson added.
In a statement, Jacqueline C. Romero, the U.S. Attorney for the Eastern District of Pennsylvania, said the DOJ “appreciate[s] ESSA’s prompt cooperation … and their efforts that will aim to infuse lending resources and help build wealth” in majority-nonwhite neighborhoods.
“Redlining in Greater Philadelphia has deep roots,” Romero said. “It’s led to decades of disinvestment in communities of color.”
Indeed, in a DOJ settlement last year, Berkshire Hathaway subsidiary Trident Mortgage Co. agreed to invest more than $20 million to increase credit opportunities in neighborhoods of color to settle allegations the company engaged in lending discrimination through its marketing, sales and hiring actions in the Philadelphia area.
And racial disparity in mortgage lending — in Philadelphia, in particular — proved a sticking point for a community advocacy group during an August 2022 hearing on the now-terminated proposed merger between TD — which has its U.S. headquarters in the city’s metropolitan area — and First Horizon.
Rachel Labush, a supervising attorney at Community Legal Services of Philadelphia, cited a 2018 report by the nonprofit group Reveal indicating that TD, among large banks, was the most likely to deny a loan application from a Black or Latinx person.
“Unfortunately, since that reporting, TD Bank has not improved,” Labush said at the hearing.
The DOJ’s redlining initiative has collected $87 million in relief for communities of color. ESSA’s settlement ranks among the smallest. Los Angeles-based City National Bank agreed to pay $31 million in January to settle redlining allegations. New Jersey-based Lakeland Bank agreed to pay more than $13 million in September. Ohio-based Park National Bank agreed to a $9 million settlement with the DOJ in late February. And Mississippi-based Trustmark Bank agreed to pay $5 million in October 2021 in the multiagency anti-redlining effort’s first settlement.
“For too long, residents of communities of color have been unlawfully denied equal access to credit and shut out of economic opportunities,” DOJ Assistant Attorney General Kristen Clarke said Wednesday. “When banks engage in redlining, they perpetuate existing patterns of segregation and widen the racial wealth gap in our country. This resolution makes clear our commitment to holding banks and financial institutions accountable for modern-day redlining while ensuring access to fair lending in communities of color.”
Courtesy of Dan Ennis, Banking Dive
Courtesy of Anna Hrushka, BankingDive
Brief:
- Newark, Ohio-based Park National Bank agreed to a $9 million settlement with the Justice Department to resolve allegations the bank engaged in lending discrimination in the Columbus metropolitan area, the agency announced Tuesday.
- Park National failed to provide home loans in majority-Black and Hispanic neighborhoods in the Columbus area between 2015 and 2021, the DOJ said.
- The settlement is the sixth redlining-related penalty to be levied against a lender since the DOJ, in lock-step with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, stepped up efforts to crack down on the practice in 2021.
All of Park National’s branches and mortgage lenders in the Columbus area were concentrated in majority-white neighborhoods, the DOJ alleges in its complaint. The $9.8 billion-asset bank failed to take any meaningful measures to compensate for its lack of physical presence in majority-Black and Hispanic communities, the DOJ said.
As part of the consent order, Park National has agreed to invest at least $7.75 million in a loan subsidy fund to increase access to credit for home mortgage, improvement and refinance loans, as well as home equity loans and lines of credit in majority-Black and Hispanic neighborhoods in the Columbus area, the agency said.
The bank will also commit $750,000 to outreach, education and credit counseling initiatives, as well as $500,000 to developing community partnerships in majority-Black and Hispanic areas, according to the DOJ.
“When banks fail to provide equal access to lending services in neighborhoods of color, they engage in modern-day redlining and exacerbate the racial wealth gap in our country,” Kristen Clarke, assistant attorney general of the DOJ’s Civil Rights Division, said in a statement Tuesday. “The Justice Department will continue to fight to fulfill the promise of our nation’s fair lending laws while tearing down the discriminatory barriers that deny Black people and other people of color access to economic opportunity and homeownership.”
Park National said it has identified proactive steps to create more opportunities to connect with prospective borrowers and has several home lending initiatives underway.
“While we disagree with any suggestion that intentional discrimination took place, we are united with the DOJ in our commitment to ensuring equal access to credit for all consumers,” Park National CEO David Trautman said in a statement Tuesday.
In a separate statement to Banking Dive, Trautman said Park National Bank “takes pride in our heritage of corporate citizenship, philanthropy, and compassionate support for all communities.”
“We condemn discrimination in any form and stand firm in our commitment to providing equal access to credit for all borrowers,” Trautman said. “We look forward to creating even more opportunities for individuals and families to achieve the dream of home ownership.”
Tuesday’s consent order follows a $31 million settlement the DOJ reached with Los Angeles-based City National Bank in January over claims the bank avoided providing mortgage-lending services to majority-Black and Hispanic neighborhoods in Los Angeles County.
The DOJ said it has levied $84 million in penalties since the launch of its Combating Redlining Initiative.
Jan. 26, 2023 — To root out racial bias in the U.S. appraisal system, some experts say there’s no point in nibbling at the edges. Instead, they suggest tearing the system down and starting fresh.
“I think not many people understand how this byzantine system works,” Rohit Chopra, the Consumer Financial Protection Bureau (CFPB) director, said Tuesday.
Chopra spoke during the first-ever Federal Financial Institutions Examination Council’s Appraisal Subcommittee (ASC) hearing, which focused on appraisal bias.
The CFPB director borrowed the term byzantine from a report released in January 2022, commissioned by the Appraisal Subcommittee and led by the National Fair Housing Alliance. The report’s main conclusion is that the appraisal industry essentially regulates itself, in contrast to other sectors in housing finance.
Click here to watch a recording of the hearing.
It happens because the Appraisal Foundation, an industry-run private nonprofit, establishes standards and criteria for appraisers, which are then adopted by each state. However, appraisers, lenders, banking institutions and industry trade groups dominate the seats on the Foundation board. There are no consumers or fair housing advocates.
During the hearing, Craig Steinley, president of the Appraisal Institute, said that individual appraisers do not pay fees for the Appraisal Foundation. “It’s not a membership organization of individuals. It’s a membership organization of other organizations. We do [pay fees] by the standard materials from the Foundation.”
In response, Chopra said: “I think it’s something we need to think about whether it is appropriate for this type of fee structure and for there to be payments, including related to governance. I think that raises a lot of questions: for this Subcommittee, for the regulators and potentially for future hearings.”
Increasing accountability to decrease appraisal bias
While Congress tasks the Appraisal Subcommittee with monitoring and reviewing the Appraisal Foundation, it has no enforcement authority.
The Subcommittee is an independent executive branch with seven members on the board, including representatives from the Federal Reserve and the Office of the Comptroller of the Currency. The Subcommittee has authority over the state programs on appraisals.
“We conduct regular compliance reviews of the state programs to determine their level of compliance with the Appraisal Foundation and other federal requirements,” Jim Park, the ASC executive director, said during the hearing. “If a state is found to be out of compliance, the ASC has the enforcement authority to ensure they return to compliance.”
Park added, “However, the ASC oversight authority over the Foundation is limited to monitoring and reviewing their work. The ASC has no enforcement authority as it relates to the Foundation or its boards.”
According to Junia Howell, visiting assistant professor of sociology at the University of Illinois Chicago, there’s a “moral” problem with the current structure.
“As Director Park said at the beginning, there’s not a single other regulatory structure like this in the country, and maybe even in the world,” Howell said. “I would suggest that there needs to be a different structure that possibly increases some accountability.”
The Mortgage Bankers Association (MBA), the trade group representing mortgage lenders in the discussion, agrees with the need for changes.
“The MBA would support reforms which would lead to more independent oversight of appraisers,” Michael Fratantoni, MBA’s senior vice president of research and technology and chief economist, said.
Courtesy of Flávia Furlan Nunes, Housingwire.com
Join the Federal Financial Institutions Examination Council’s Appraisal Subcommittee (ASC) for a hearing about appraisal bias. Invited witnesses representing key stakeholder groups will share their views with the ASC during the hearing.
The hearing will take place on Tuesday, January 24, 2023 from 10:00 a.m. – 12:00 p.m. EST. Members of the public are invited to listen to the hearing and provide written comments. Comments can be submitted to [email protected] until February 8, 2023.
The hearing will be held in-person at the Consumer Financial Protection Bureau (CFPB) Headquarters at 1700 G Street NW, Washington, DC 20552. For those that can’t attend in-person, the hearing will also be livestreamed.
This event is open to the public and requires an RSVP. Please register if you plan to attend or view the hearing. RSVP here.
If you require a reasonable accommodation in order to attend this event, please contact [email protected] 72 hours prior to the start of this event.
This announcement will be updated with more details as they become available.
More information about the Appraisal Subcommittee can be found here .
Link to CFPB posting can be found here.