First Tennessee Bank reaches $1.9 million settlement over discriminatory lending

Accused of Fair Housing Act violations

(Update: This article is updated with a statement from First Tennessee.)

For the second time in just over six months, First Tennessee Bank, the regional bank for First Horizon National, is settling with the federal government over allegations that it violated U.S. lending laws.

In June 2015, First Tennessee Bank agreed to pay $212.5 million to resolve allegations that it violated the False Claims Act by “knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements.”

That settlement resolved allegations that First Tennessee failed to comply with FHA origination, underwriting and quality control requirements.

As part of the settlement, First Tennessee admitted that from January 2006 through October 2008, it “repeatedly certified” for FHA insurance mortgage loans that did not meet the Department of Housing and Urban Development’s underwriting requirements.

But now, First Tennessee has run afoul of HUD lending rules again, as HUD announced Monday that it reached a settlement with First Tennessee over allegations that the bank violated the Fair Housing Act by discriminating against African-American and Hispanic mortgage loan applicants by denying them mortgage loans, and by allegedly failing to place bank branches in minority-concentrated areas.

The settlement stems from a complaint filed against First Tennessee by the National Community Reinvestment Coalition, which alleged that the bank “disproportionately” denied loan applications from African-American and Hispanic borrowers and failed to place bank branches in minority-concentrated areas in Chattanooga, Knoxville, Memphis and Nashville.

According to an announcement from HUD, First Tennessee will establish a $1.5 million subsidy fund to provide interest rate reductions on home mortgages, and down payment or closing cost assistance to qualified borrowers in “identified portions” of Chattanooga, Knoxville, Memphis and Nashville.

In a statement provided by a spokesperson, First Tennessee said that is "pleased" to put this matter behind it. "First Tennessee’s CRA record is satisfactory, and we are proud of our long tradition of supporting our communities," the bank said in a statement.

Additionally, First Tennessee agreed to partner with one or more “community-based” organizations to provide home repair or other grants to help existing homeowners repair properties in predominantly minority communities, or partner with one or more community-based organizations to provide credit, financial, homeownership or foreclosure prevention services to residents in the affected areas. 

First Tennessee Bank will contribute $270,000 over three years to support these partnership efforts, as well as an additional $105,000 to fund similar services to be provided directly by the National Community Reinvestment Coalition.

HUD also said that First Tennessee Bank will pay $25,000 in damages to the National Community Reinvestment Coalition as part of the settlement.

“Every family should have an equal shot at becoming a homeowner, regardless of what they look like or where they come from. Anything less is against the law,” said HUD Assistant Secretary for Fair Housing and Equal Opportunity Gustavo Velasquez. “HUD remains committed to ensuring that banks and other lenders comply with the Fair Housing Act.”   

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