The Justice Department has announced a settlement with Houston-based Cadence Bank to resolve allegations that the bank engaged in lending discrimination by ‘redlining’ predominantly Black and Hispanic neighborhoods in the Houston area. The Department alleged that the bank engaged in redlining between 2013 and 2017 by avoiding providing loans and other home mortgage services in majority-Black and Hispanic neighborhoods.
As a depository bank, Cadence is subject to the requirements of the Community Reinvestment Act which requires most banks to meet the credit needs of the communities that they serve. Of the nearly 1,600 mortgage applications that Cadence generated in that period, 14 percent came from majority-Black and Hispanic areas. In contrast, similar-sized peers in the Houston area generated 36 percent of their applications from the same areas.
As part of the settlement, Cadence has agreed to invest over $5.5 million to increase credit opportunities for residents of those neighborhoods. Specifically, the bank 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, Cadence will pay $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.)