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HUD Approves Settlement of Fair Housing Complaint Against OneWest Bank

By Elizabeth Whitman | August 1, 2019

On July 29, 2019, the U.S. Department of Housing and Urban Development (HUD) announced that it has approved a conciliation agreement settling a Fair Housing complaint against CIT Bank, N.A., dba OneWest Bank (CIT). California Reinvestment Coalition (CRC) had accused CIT of violating the Fair Housing Act (FHA) in its positioning branch location, marketing, and mortgage loan origination practices. CRC claimed CIT’s actions discriminated against African-American and Latino borrowers in Southern California.

Fair Housing Act and Mortgage Loans

FHA prohibits housing discrimination based upon race, color, religion, national origin, sex, familial status, and disability. The FHA not only prohibits discrimination when renting or selling residential real estate. In addition, FHA prohibits a lender from refusing to provide mortgage loans or to offer different loan terms based upon protected characteristics.

What is Redlining?

CIT was accused discrimination by denying otherwise creditworthy borrowers mortgage loans based upon the neighborhood in which they live. This practice, called “redlining,” refers to a historical practice, established by the FHA in the 1930’s. Mortgage lenders drew red lines on a map around “undesirable” neighborhoods in which they didn’t want to make loans.

Typically, the redlined areas were areas with a large minority population. With mortgage loans not available on reasonably terms, many African-Americans were forced to accept predatory lending and purchase practices. Many minorities were unable to buy homes at all. Although it was outlawed when the FHA was passed in 1968, remnants of redlining continue today in areas the maps deemed “undesirable.”

The Conciliation Agreement

The Conciliation Agreement will last for three years. During this period, CIT will create programs designed to increase home ownership opportunities for African-Americans and Latinos. CIT’s President of Consumer Banking, Steve Solk, expressed commitment to these programs: “We remain committed to serving the Southern California community with the tools, training and access to credit that is needed to pursue homeownership and enable more individuals to achieve their financial goals and thrive.”

CIT’s new programs include:

  • Putting a branch in a specified majority-minority and low-to-moderate income (LMI) population.
  • Originating $100,000,000 in loans for owner-occupied homes in majority-minority areas.
  • Not denying loans simply because an applicant has a taxpayer identification number instead of a Social Security Number.
  • Creating an independent second level review for denied loan applications.
  • Offering FHA-insured and other residential mortgage loan products in at all branches in the majority-minority area.
  • Creating a $5,000,000 Affordable Home Mortgage Program to help minorities purchase, improve, or refinance their homes.
  • Given $1,000,000 grants to minority and LMI areas. This includes grants for housing and financial literacy education, community services, or community revitalization.
  • Providing $1,300,000 in marketing and outreach to majority-minority areas.
  • Requiring fair lender training for employees.

CRC Executive Director, Paulina Gonzalez-Brito, outcome: “We are pleased that OneWest has committed to serving Southern California’s communities of color in this way. We look forward to seeing the positive impacts of these lending commitments and programs on California neighborhoods and working class families striving to build wealth through buying a home.”

Elizabeth Whitman is an attorney and broker who has represented clients in more than $1.3 billion in real estate transactions.Elizabeth's law firm, Whitman Legal Solutions, LLC, is located in suburban Washington, DC and represents real estate owners and securities sponsors throughout the nation.
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