Sep 16

Recent Compliance Issues: 8/21/15 – 9/3/15


1. A federal appeals court on Tuesday revived three lawsuits in which the City of Miami accused Bank of America Corp and Citigroup Inc of predatory mortgage lending. The court determined that a lower court erred in dismissing the city’s claims under the federal Fair Housing Act (FHA). Miami had accused the banks of steering non-white borrowers into higher-cost loans they could not afford. The city claimed that this practice, also known as reverse redlining, went on for a decade and that it caused a large number of foreclosures resulting in lower property tax collections. The decision to revive the lawsuits was because it was clear that the harm the city claims to have suffered has a sufficiently close connection to the kind of conduct the FHA prohibits.

2. Recently, M&T Bank Corp (M&T) agreed to upgrade its mortgage lending policies to settle a lawsuit by a nonprofit group that accused it of discriminatory mortgage lending practices in New York City. The settlement bans M&T loan officers from “steering” borrowers to particular neighborhoods or loans based on their race or national origin, or using census tract data regarding race or national origin as a criterion in offering mortgages. M&T also agreed to pay $485,000 to the plaintiffs for damages and legal fees. The settlement is separate from federal regulatory probes into whether M&T complied with underwriting guidelines for loans insured by the FHA, and mortgages sold to Fannie Mae and Freddie Mac.

The above two cases send a clear message regarding the importance of complying with the provisions of the FHA, and ensuring that your institution has strong and appropriate Fair Lending policies and practices in place. Allow our federally trained, compliance specialists to review your institution’s Fair Lending program to determine its efficacy in addressing this critical area of your bank’s compliance management and review system.