HUD Settles with North Carolina Commercial Lender Over Alleged Fair Lending Violations

HUD Fair Housing Fair Lending

On June 8, HUD announced a conciliation agreement with a North Carolina-chartered commercial lender to resolve allegations that, as the successor of a merger with a South Carolina-based bank, it denied mortgage loans to African American, Latino, and Asian American applicants at a disproportionately higher rate than white applicants in violation of Section 804(b) and 805 of the Federal Fair Housing Act. After conducting an analysis of mortgage loans originated by the South Carolina bank between 2010 and 2011, the Department found that the bank demonstrated preferential treatment of white mortgage loan applicants through the retail channel via manual override of its automated underwriting system. Under the terms of the settlement agreement, the commercial lender, having cooperated with HUD’s investigation, must among other things, (i) provide nonprofit organizations with $140,000 to use toward credit and housing counseling, financial literacy training, and related programs for first-time homebuyers in South Carolina; (ii) spend an aggregate amount of $20,000 on positive marketing, advertising, and outreach to residents in majority-minority census tracts in South Carolina; (iii) partner with a non-profit organization or community groups involved in financial education to conduct, at a minimum, 24 financial education programs in South Carolina for individuals and small business owners; (iv) hire three mortgage banker market specialists to “focus on diverse lending in Charleston-North Charleston-Summerville, Columbia, and Greenville-Anderson-Mauldin metro areas”; (v) require fair housing training for all employees and agents substantially involved in manual underwriting of mortgages; and (vi) implement “a new standardized and objective set of guidelines for a second review of retail channel residential loan applications initially denied by the automated underwriting system.”