In a recent settlement, North Carolina and First National Bank of Pennsylvania have agreed to resolve allegations of racial discrimination against Black and Latino home buyers in North Carolina. The Justice Department found that the bank avoided providing mortgage loans in areas of Charlotte and Winston-Salem with majority Black and Hispanic residents between 2017 and 2021.
Attorney General Josh Stein said the bank worked harder to provide mortgage loans in parts of areas with majority white residents. According to AG Stein, the purpose of the agreement is to create better lending opportunities for all North Carolinians.
First National Bank has 16 branches in and around Charlotte and 15 branches in the Winston-Salem area. The Attorney General alleged that FNB’s conduct discouraged Black and Hispanic North Carolinians from applying for loans. As a result, the bank will create an $11.75 million loan subsidy fund to help increase lending for home mortgage loans to communities of color in the Charlotte and Winston-Salem areas.
FNB will also open two new branches in Charlotte and a new branch in Winston-Salem to provide financial services to residents of color. The bank will hire staff focused on lending to communities of color in Charlotte and Winston-Salem, spend $750,000 on advertising its services and providing consumer financial education to communities of color in the two areas, and ensure To review your appropriate credit and community credit requirements. It’s helping communities.
As part of its agreement with USDOJ, FNB will also spend $1 million on community partnerships to provide credit and financial services in these areas. The settlement comes after a four-year period of redistricting over claims the bank allegedly avoided providing mortgage loans in areas with majority black and Hispanic residents.
Redlining is the practice of denying services such as mortgage loans to residents of certain areas based on their race or ethnicity. The term was coined in the 1960s when maps were used to depict areas where banks refused to lend to people of color. Redlining has been illegal since the Fair Housing Act of 1968, but discrimination in lending continues.
First National Bank of Pennsylvania isn’t the only bank facing redlining claims. In recent years, other banks such as Bank of America and JPMorgan Chase have faced similar allegations. In 2021, JPMorgan Chase agreed to pay $24 million to settle redlining claims in Detroit.
What is redlining and how does it affect communities?
Redlining is a discriminatory practice in which banks and other financial institutions deny credit and financial services to residents of certain neighborhoods based on their race, ethnicity, or national origin. The term “redlining” comes from the fact that maps of cities were created with red lines around neighborhoods that were deemed “hazardous” for lending.
Redlining has a long and troubled history in the United States. It was widespread in the 1930s, when the federal government’s Home Owners’ Loan Corporation (HOLC) created color-coded maps of cities that ranked neighborhoods based on their perceived desirability for mortgage lending. Neighborhoods with large Black and immigrant populations were often marked in red, indicating they were “hazardous” for lending.
The practice continued in the decades that followed, with banks and other financial institutions denying credit and financial services to residents of certain neighborhoods based on their race, ethnicity, or national origin. Redlining has had a profound impact on communities of color, making it more difficult for them to buy homes, start businesses, and build wealth.
Redlining can take many forms, including:
* Refusing to lend to borrowers in certain neighborhoods
* Charging higher interest rates and fees to borrowers in certain neighborhoods
* Providing fewer financial services, such as checking and savings accounts, to residents of certain neighborhoods
* Failing to open branches in certain neighborhoods, making it more difficult for residents to access financial services
Redlining has contributed to racial and ethnic disparities in homeownership, wealth, and economic opportunity. According to a report by the National Community Reinvestment Coalition, Black and Latino households are less likely to own homes than white households, and the homeownership gap between white and Black households is larger today than it was in 1960.
Redlining has also contributed to racial and ethnic disparities in income and wealth. A report by the Brookings Institution found that the median net worth of white households is $171,000, compared to just $17,600 for Black households and $20,700 for Latino households.
Efforts to address redlining have had some success, but the practice continues to affect communities of color. The Department of Justice has taken enforcement action against banks and other financial institutions for redlining, and many cities and states have passed laws to prohibit the practice. However, more needs to be done to ensure that all communities have equal access to credit and financial services.
What are some current efforts to address the legacy of redlining?
There are several current efforts to address the legacy of redlining and promote fair housing and lending practices. Here are a few examples:
1. Enforcement actions by regulatory agencies: The Department of Justice (DOJ) and other regulatory agencies have taken enforcement actions against banks and other financial institutions for redlining and other discriminatory lending practices. For example, in 2021, the DOJ reached a $13.5 million settlement with First National Bank of Pennsylvania over allegations of redlining in North Carolina.
2. Community reinvestment acts: Many states and cities have passed community reinvestment acts (CRAs) that require banks to invest in low- and moderate-income communities. CRAs typically require banks to report on their lending, investment, and service activities in these communities and to develop plans to address any disparities.
3. Fair housing and lending laws: Many states and cities have passed fair housing and lending laws that prohibit discrimination based on race, ethnicity, and other protected characteristics. These laws often require banks to collect and report data on their lending practices and to take steps to address any disparities.
4. Community development financial institutions (CDFIs): CDFIs are private financial institutions that provide credit and financial services to underserved communities. CDFIs often focus on providing loans and other financial services to low- and moderate-income borrowers and small businesses.
5. Inclusive growth initiatives: Some cities and states have launched inclusive growth initiatives that aim to promote economic opportunity and mobility for all residents. These initiatives often include efforts to increase access to credit and financial services for underserved communities, as well as initiatives to promote workforce development and entrepreneurship.
6. Fair housing and lending education: Many organizations provide education and training on fair housing and lending practices to banks, lenders, and other stakeholders. These efforts aim to raise awareness of the issue of redlining and to promote best practices for fair lending.
While these efforts have had some success in addressing the legacy of redlining, more needs to be done to ensure that all communities have equal access to credit and financial services. Ongoing monitoring and enforcement, as well as continued investment in underserved communities, will be essential to promoting fair housing and lending practices.
