US bank agrees to pay $9 million to settle discrimination case

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US bank agrees to pay $9 million to settle discrimination case

The largest community bank in the US, Washington Trust, has agreed to pay $9 million to resolve allegations that it engaged in lending discrimination against homesbuyers in minority Black and Latino neighborhoods.

Since its creation in Rhode Island in 1800, the bank has never offered its home loan services at a branch location in a majority-Black or Latino neighborhood throughout the state, including in Providence, where the vast majority of the state's Black and Latino population live.

The practice perpetuated the scourge of redlining, a longstanding racist policy of banks blocking people of color from getting mortgages.

The Justice Department's agreement is the latest effort by the Justice Department to hold banks and other mortgage lenders accountable for depriving homebuyers of access to services in major Black and Latino neighborhoods.

The justice department has settled a case with Trident Mortgage Company, which is owned by billionaire Warren Buffett's holding company, Berkshire Hathaway, for avoiding providing home loans and other mortgage services to majority-minority neighborhoods in the region surrounding Philadelphia.

In the case of Washington Trust, its data showed that its home loan applications from individuals in majority-Black and Latino neighborhoods were significantly lower than those in similar-sized peer lenders.

In 2016 to 2021, only 2.4% of Washington trust's mortgage applications came from people living in minority-Black and Latino areas. At four times the rate of Washington Trust, the bank's rival lenders could source applications from majority-Black and Latino areas. Even when Washington Trust sourced mortgage loans from residents in minority Black and Latino areas, the residents were disproportionately whiter than the bank's rivals.

The disparity continued when Washington trust made the loans. Of the 750,000 residential mortgage loans made between 2016 and 2021, just 142 were from residents in majority-Black and Latino neighborhoods. By comparison, rival lenders approved four times as many loans from residents of similar-situated Black and Latino areas, the federal investigation found.

The Bank's decision to operate branches only in majority-white neighborhoods'restricted' homebuyers in majority-Black and Latino neighborhoods from access to the Bank's credit and mortgage lending services, according to the federal complaint. By April 2023, the bank operated its 23 branches in majority-white neighborhoods. The bank also decided to not assign mortgage loan officers to 'outreach, market, advertise, or generate loans' to people in majority Black or Latino neighborhoods.

The department of Justice attorneys argued that those decisions'discouraged' people living in such neighborhoods from applying for home loans. They had to travel to branches in majority-white neighborhoods, including for walk-in appointments, if they wanted to access the bank's services.

The bank'relied completely on mortgage loan officers who worked in those branches to source clients in other neighborhoods and failed to 'train or incentivize' them to make up for the bank's lack of presence in majority-Black and Latino neighborhoods.

Kristen Clarke, the assistant attorney general of the Justice Department's civil rights division, said the settlement sends a strong message to banks regarding the Justice Department's firm commitment to combat modern-day redlining and ensure that all lenders are providing equal access to home loan opportunities to communities of color.

Washington trust will open two branches in minority Black and Latino neighborhoods, and assign mortgage officers focused on those areas, while investing in facilitating home loans more easily there.