DOJ Settles Redlining and FHA Violation Charges Against Lenders

Wednesday, December 28, 2016 - 17:44
The U.S. Department of Justice (DOJ) has filed a consent order resolve allegations of redlining against two Ohio-based financial institutions, Union Savings Bank and Guardian Savings Bank

The U.S. Department of Justice (DOJ) has filed a consent order resolve allegations of redlining against two Ohio-based financial institutions, Union Savings Bank and Guardian Savings Bank.

The DOJ charged the banks with violations of the Fair Housing Act and the Equal Credit Opportunity Act in connection to their lending practices aimed at predominantly African-American neighborhoods in and around three Ohio cities (Cincinnati, Columbus and Dayton), and in Indianapolis. As part of the settlement, Union Savings Bank will open two full-service branches and Guardian will open one loan production office to serve the residents in the markets cited by the DOJ, and the banks will invest at least $9 million in these markets. The banks will also invest $2 million in advertising, outreach, financial education and community partnership efforts to encourage mortgage lending in these markets.

“Lenders must treat all potential borrowers equally and fairly,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “This settlement embodies a win-win solution for all parties by increasing the volume of mortgage loans, driving economic activity and creating a level playing field for qualified borrowers.”

Separately, the DOJ announced that Troy, Mich.-based United Shore Financial Services LLC   agreed to pay $48 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration (FHA) that did not meet applicable requirements related to origination, underwriting and quality control. The allegations cover loans that were originated between 2006 and 2011.

“The federal government insures loans on the condition that lenders comply with certain rules to safeguard federal funds,” said U.S. Attorney Barbara L. McQuade for the Eastern District of Michigan. “When lenders breach their duty of due diligence and make risky loans that go bad, taxpayers pay the bill. By holding accountable lenders who fail to comply with underwriting requirements, we hope to send a message to all lenders that they must comply with government standards for federally insured loans.”

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