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Another lender settles redlining accusations with DOJ

Consent order with Lakeland Bank comes as it pursues a $1.3 billion merger with Provident Financial Services

The Department of Justice reached a $12 million-plus settlement with Lakeland Bank over claims the lender engaged in redlining in the Newark, New Jersey metropolitan area.

The complaint filed in federal court on Wednesday alleges that from at least 2015 to 2021, Lakeland failed to provide mortgage lending services to Black and Hispanic neighborhoods in Newark. The DOJ said that all of Lakeland’s branches were located in majority-white neighborhoods and that its loan officers did not serve the credit needs of Black and Hispanic neighborhoods in and around Newark.

Lakeland, a community bank, operates 68 branches in northern New Jersey and in New York’s Hudson Valley. Federal officials said similar banks generated five times as many loan applications from prospective Black and Latino home buyers as Lakeland.

Financial institutions that refuse to provide mortgage lending services to communities of color not only contribute to the persistent racial wealth gap that exists in this country, but also violate federal law,” U.S. Attorney General Merrick Garland said in a statement. “The agreement with Lakeland announced today represents the Justice Department’s continued commitment to addressing modern-day redlining, and to ensuring that all Americans have equal opportunity to obtain credit, no matter their race or national origin.”

Under the proposed consent order, Lakeland agreed to invest at least $12 million in a loan subsidy fund for Black and Hispanic neighborhoods in and around Newark. It also pledged $750,000 for advertising, outreach and consumer education, as well as $400,000 for development of community partnerships to increase access to mortgages. Under the consent order, Lakeland will open at least two new bank branches staffed with at least four mortgage loan officers dedicated to serving the area in and around Newark.

Lakeland Bank admitted no wrongdoing as part of a consent decree.

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“While we strongly disagree with any suggestion we have acted improperly, Lakeland Bank has fully cooperated throughout this process and remains confident that we have been fully compliant with all fair lending laws,” said Thomas Shara, Lakeland’s president and CEO. “This resolution avoids the distraction of protracted litigation and allows us to focus our time, expertise, and resources towards achieving a shared goal of meeting the credit needs of all residents within our communities, including those who historically have been underserved.”

In July, the DOJ and the Consumer Financial Protection Bureau announced a $24.4 million consent order with Trident Mortgage Co., a subsidiary of Warren Buffet’s Berkshire Hathaway. It was the DOJ’s second-largest mortgage redlining settlement ever, and the first against a nonbank lender. (The largest settlement recorded, at $25 million, was with New Jersey-based Hudson City Savings Bank in 2015.)

In an investigative feature published in March, HousingWire examined the federal government’s feeble fight to end redlining. The 1977 Community Reinvestment Act, the main law policing redlining, is only enforced when banks seek a merger or acquisition.

The three agencies in charge of such reviews  — the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency — have not denied a single bank merger in 15 years.

Perhaps not coincidentally, Lakeland this week agreed to a $1.3 billion all-stock merger with Provident Financial Services, which, if approved, would create a financial institution that has more than $25 billion in assets and $20 billion in total deposits.

In its press statement regarding the redlining settlement, Lakeland noted that it has received an “Outstanding” grade on its CRA rating every year since 2004.

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