Lending

First Federal Bank of Kansas City reaches $2.8 million settlement for redlining

Bank accused of excluding minority neighborhoods from lending service area

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(Update: This article is now updated with a statement from First Federal Bank of Kansas City.)

First Federal Bank of Kansas City agreed to a $2.8 million settlement over charges that the bank excluded minority neighborhoods from its lending service area, a practice commonly known as redlining.

According to the Department of Housing and Urban Development, First Federal Bank of Kansas City allegedly redlined several neighborhoods where the majority of the residents are African-American, thereby limiting residential mortgage lending to persons based upon their race, which is a violation of the Fair Housing Act.

The settlement agreement stems from two complaints filed on Oct. 5, 2015 by two fair housing groups that accused First Federal Bank of Kansas City of redlining.

The groups, the nonprofit organizations Metropolitan St. Louis Equal Housing and Opportunity Council and Legal Aid of Western Missouri, alleged that the bank’s lack of market penetration in African-American communities in the urban core (East Side) of Kansas City, Missouri made residential real estate products less available to people based on race. 

The groups also alleged that the bank designated its service area so that it excluded areas of “high African-American concentration.”

As part of the HUD-mediated settlement agreement, First Federal Bank of Kansas City agreed to provide $75,000 in discounts or subsidies on home purchase loans on owner-occupied properties in majority African-American census tracts in the Kansas City metropolitan area over a three-year period. 

Additionally, the bank agreed to originate $2.5 million in mortgage loans in majority African-American neighborhoods over a three-year period.

“First Federal Bank of Kansas City has a long history of compliance with fair lending laws,” said J.R. Buckner, the bank’s president & CEO. “We are committed to expanding our presence into all Kansas City communities, and believe this agreement is a bold step in furtherance of our mission to help all of our customers and communities prosper.” 

As part of the settlement, First Federal Bank of Kansas City also agreed to a series of “important” fair lending directed financial commitments, including:

  • $105,000 to support a loan pool that finances the rehabilitation of vacant, blighted homes in distressed areas of Kansas City
  • $50,000 at the rate of at least $15,000 per year for three consecutive years for affirmative marketing and outreach to African-American communities in the Kansas City metropolitan area
  • $30,000 to support financial education specifically targeting majority African-American communities
  • $50,000 directly to the named complainants to support their fair lending and community reinvestment work

First Federal Bank of Kansas City will also appoint a Community Development Lender who is focused on low- and moderate-income communities and majority African American neighborhoods.

And finally, HUD said that dependent on the conditional regulatory approval of a planned merger, the bank also committed to maintaining three full-service established branches in majority minority census tracts.

“Homeownership should never be affected by the color of a person’s skin. This agreement helps to ensure that all qualified families in the Kansas City area get a fair shot at owning their own home, regardless of race,” said HUD Assistant Secretary for Fair Housing and Equal Opportunity Gustavo Velasquez. “HUD will continue to work with banks across the nation to ensure they follow the Fair Housing Act.”

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