Saturday, May 25, 2024

City National Bank Settles $31 Million After Discriminating Against Black and Latino Neighborhoods

The U.S. Department of Justice has reached a $31 million settlement with City National Bank, based in Los Angeles, California, in a historical housing discrimination case. This settlement is the most significant redlining case investigated by the Justice Department.

Redlining is a longstanding set of policies and practices prohibiting banks from approving mortgages for people seeking to purchase homes in prominent Black and Latino neighborhoods. It originated in the 1930s with neighborhoods rated on a risk scale of ‘A’ to ‘D’ and lenders drawing red lines around “risky” neighborhoods on city maps. Most banks refused to finance mortgages in those areas.

Legislation like the Fair Housing Act of 1968 and the Home Mortgage Disclosure Act of 1975 was intended to outlaw redlining, but by then, irreversible damage had been done. White families became wealthy via home ownership, while Black communities were left with low property values, underfunded schools, crime, and poverty. Redlining policies may have ended five decades ago, but it is still in practice today, as shown by the recent lawsuit against City National Bank.

Since 2017, City National has discriminated against Black and Latino residents by approving fewer mortgages and marketing less frequently in their communities. Over the past two decades, the bank opened just one new branch in a Black or Latino community, resulting in other financial institutions receiving more mortgage applications than City National.

According to a statement on the JOD website, City National has agreed to devote over 95% of the settlement to a loan subsidy fund for Los Angeles County in Black and Latino neighborhoods. It is unclear how the “subsidy” will work and precisely whom it will ultimately benefit.

Inglewood, for example, is a predominantly Black and Latino community — for now. The neighborhood is going through rapid gentrification with the building of football stadiums, basketball domes, apartments, retail outlets, public parks, and entertainment venues. City National could get away with giving significant portions of the almost $30 million subsidy to white gentrifiers even though Inglewood is still technically a Black and Latino community.

“Redlining is a practice from a bygone era, runs contrary to the principles of equity and justice, and has no place in our economy today,” Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said in the DOJ statement. “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.”

The State of U.S. Mortgage Fairness, a research report published by the company FairPlay, says “mortgage fairness” is no better now for Black applicants than it was 30 years ago. U.S. Attorney Martin Estrada specifically acknowledged in the DOJ statement that L.A. is one of the most racially and ethnically diverse cities in America. Unfortunately, it’s also a city that has yet to solve its longstanding residential segregation problem.