Los Angeles-headquartered City National Bank agreed to pay $31 million in relief to impacted individuals and communities to settle a redlining case with the U.S. Department of Justice (DOJ), the parties announced Thursday.
City National was accused of the illegal practice of avoiding the provision of mortgage services to majority-Black and Hispanic neighborhoods. In this case, the alleged redlining occurred from 2017 through at least 2020 in Los Angeles.
“Fifteen months after I vowed that the Justice Department would be aggressively stepping up our efforts to combat discriminatory practices in the housing market, we have today secured the largest redlining settlement in Department history,” attorney general Merrick B. Garland said in a statement.
To illustrate its case, the DOJ mentioned that during the last 20 years, City National opened only one branch in majority-Black and Hispanic neighborhoods, compared to 11 in other neighborhoods, and did not assign an employee to sell mortgage loans at that branch.
Consequently, other banks received more than six times as many applications in these neighborhoods in Los Angeles County than City National each year.
Under the consent order, which is subject to court approval, City National agreed to invest $29.5 million in loan subsidy funds for residents of majority-Black and Hispanic neighborhoods in Los Angeles County, $500,000 in advertising, $500,000 in financial education programs, and $750,000 in community partnerships.
The bank also committed to opening one new branch in a majority-Black and Hispanic neighborhood and evaluating more opportunities to expand in these areas.
Amid the settlement, City National also announced it will expand its product set and launch Special Purpose Credit Programs (SPCPs) for commercial and residential mortgage loans to underserved populations. This followed the hiring of Vanessa Montañez to the newly created role of Community Lending National Sales Manager last fall.
Mortgage tech platform Modex shows that City National Bank produced about $5.6 billion in mortgage loans over the last 12 months through about 70 loan officers and 268 branches. In this period, 89% of the loans were conventional and 60% were refinancings.
Redlining cases have been on the DOJ’s radar for the last two years. The DOJ has reached $75 million in settlements regarding the topic since October 2021, when the Combating Redlining Initiative was launched.
In July, the DOJ and the Consumer Financial Protection Bureau announced a $24.4 million consent order with Trident Mortgage Co., a subsidiary of Warren Buffet’s Berkshire Hathaway. In September, the DOJ reached a $12 million-plus settlement with Lakeland Bank over claims the lender engaged in redlining in the Newark, New Jersey metropolitan area.
“This settlement should send a strong message to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable when they fail to do so,” assistant attorney general Kristen Clarke said in a statement.