Cadence Bank reaches settlement with DOJ over redlining

Candence Bancorp redlined predominantly Black and Hispanic neighborhoods around Houston between 2013 and 2017, DOJ says

Cadence Bancorporation, parent of Cadence Bank, reached separate settlements with the Department of Justice and the Treasury Department’s Office of the Comptroller of the Currency totaling over $8.5 million for redlining practices, according to the federal government.

The DOJ alleged that between 2013 to 2017, the bank violated the Fair Housing Act and the Equal Credit Opportunity Act “by avoiding predominantly Black and Hispanic neighborhoods [in the Houston, metro area] because of the race, color and national origin of the people living in those neighborhoods.”

To address these grievances, Cadence has agreed to invest over $5.5 million to increase credit opportunities for residents of those neighborhoods.

Specifically, Cadence will provide $4.17 million to create a loan subsidy fund for residents of predominantly Black and Hispanic neighborhoods in the Houston area, $750,000 for development of community partnerships to provide services that increase access to residential mortgage credit in those neighborhoods. At least $625,000 will be allocated to advertising outreach, consumer financial education, and credit repair initiatives, the DOJ said Monday.

Additionally, the bank, with assets totaling over $18 billion, will parse out $3 million to the OCC to cover penalties related to the violations alleged in the department’s complaint. (The DOJ opened its investigation after the OCC referred the matter, the department noted.)

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“When banks fail to provide equal access to credit in communities of color, they violate our civil rights laws and they deprive people in those communities of the opportunity to build wealth,” said Kristen Clarke, assistant attorney general at DOJ’s civil rights division.

The DOJ also claims that bank loan officers did not serve the credit needs of majority-Black and Hispanic neighborhoods, and that Cadence’s outreach and marketing avoided minority neighborhoods.  

Per the agreement, the bank is also expected to dedicate at least four mortgage LOs to majority- Black and Hispanic neighborhoods in Houston and employ a director of community lending and development who will oversee these efforts, the DOJ said.

Paul Murphy, CEO of Cadence Bancorporation, issued a statement on Monday acknowledging that its mortgage program is not where the company “wanted it to be,” though he did not cite the term “redlining” in his statement.

“We subsequently developed and successfully implemented a coordinated set of efforts to sustainably increase our lending in majority-minority census tracts and minority neighborhoods in Houston,” he said. “For the last several years, the percentage of our Houston residential mortgage lending in minority neighborhoods has reached 50% or above, exceeding our peers. We are pleased with our results today.”

Murphy said that in response to the “Houston mortgage lending proportionality issues” the company “on its own initiative…established the Fair and Responsible Banking Working Group to study and create an action plan to increase mortgage lending in Houston majority-minority census tracts and Hispanic neighborhoods.”

The bank, based in Texas, also has branches in Alabama, Florida, Georgia and Tennessee. Mortgage lending in the Houston area accounts for approximately 40% of the company’s total home mortgage business, the DOJ said.

Cadence is in the midst of a merger with $28 billion asset regional bank BancorpSouth, based in Tupelo, Mississippi. BancorpSouth Bank expects the transaction to close in the fourth quarter of 2021 and anticipates full integration will take place in the second half of 2022.

In late June, the Consumer Financial Protection Bureau said that multiple lenders in America had recently engaged in deceptive business practices, including violations of the Truth in Lending Act and the Equal Credit Opportunity Act, and provided inaccurate data on mortgage loans. The agency did not name the lenders or servicers it examined, and did not levy any fines or penalties. Redlining was among the issues.

The CFPB said one lender — which raised red flags when it received fewer applications from minority neighborhoods — engaged in redlining. In the lender’s direct marketing and open house materials, the models were white. The lender’s offices were concentrated in white neighborhoods, and nearly all of its loan officers were white. The CFPB also found that loan officers sent internal emails “containing racist and derogatory content.”

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