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In the largest-ever redlining settlement, a bank will pay $31 million for alleged lending discrimination.

The largest bank headquartered in Los Angeles agreed to pay $31 million for allegedly engaging in lending discrimination, according to the Department of Justice, in the largest redlining settlement in the department’s history.

According to a Justice Department complaint filed in federal court Thursday, City National Bank, one of the 50 largest banks in the United States, engaged in redlining in Los Angeles County from 2017 to at least 2020.

According to the complaint, the bank “avoided providing mortgage lending services” to majority-Black and Hispanic neighbourhoods, discouraging residents from obtaining mortgage loans.

Here’s everything you need to know about redlining and the City National Bank case.

What exactly is redlining?

According to the Justice Department, “redlining” is an illegal practise in which lenders avoid providing credit services to people of colour.

In the twentieth century, banks and real estate agents determined that neighbourhoods where people of colour lived — denoted in red ink — were the riskiest to invest in.

The practise made it difficult for Black families, in particular, to accumulate and maintain wealth in the same way that white families could, resulting in the widening of the racial wealth gap and the persistence of housing insecurity.

Redlining in the twenty-first century is “unacceptable,” according to Martin Estrada, U.S. Attorney for the Central District of California. Ending redlining, he says, is a “critical step toward closing the widening gaps in homeownership and wealth, particularly in a city as large and diverse as Los Angeles.”

What is City National Bank charged with?
According to the federal complaint, other banks received more than six times as many applications in Los Angeles County’s majority-Black and Hispanic neighbourhoods than City National each year from 2017 to at least 2020.

According to the complaint, City National “only opened one branch” in a majority-Black and Hispanic neighbourhood in the last two decades, despite opening or acquiring 11 branches during that time period.

“Moreover, unlike its branches in majority-white areas, City National did not assign any employee to generate mortgage loan applications at that branch,” according to the Justice Department.

“We disagree with the allegations, but nonetheless support the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race,” City National said in a statement.

What will happen now?
City National agreed to invest at least $29.5 million in a loan subsidy fund for residents of majority-Black and Hispanic neighbourhoods in Los Angeles County as part of its settlement with the Justice Department.

Among other things, the bank agreed to invest $1.75 million in community outreach, a consumer financial education programme, and community partnerships to increase access to residential mortgage credit.

The settlement is part of a larger DOJ effort to combat redlining.
The agreement signed on Thursday is part of the Justice Department’s nationwide “Combating Redlining Initiative,” which will be launched in October 2021.

So far, the initiative has resulted in settlements totaling more than $75 million, including a $20 million agreement with Trident Mortgage Company and a $13 million agreement with Lakeland Bank.

The settlements totaled $67 million for loan subsidy funds in Houston, Memphis, Philadelphia, Newark, Delaware, and Los Angeles.

Discrimination in housing and lending is ‘less obvious’ nowadays.
The settlement was announced Thursday at the historic Second Baptist Church in Los Angeles by Kristen Clarke, US Assistant Attorney General for Civil Rights. She pointed out that the agreement comes just a few days before Martin Luther King Jr. Day.

“While housing and lending discrimination are less overt today than they were in 1968,” Clarke said.

Clarke stated that the settlement “embodies” King’s commitment to fighting economic injustice and ensuring that Black Americans and other people of colour have access to the credit they need to buy a home.

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