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Bank of America owned by Royal Bank of Canada has agreed to pay more than $31 million US for systematically foreclosing on mortgages in Black and Latino communities in Los Angeles.
The US Department of Justice has accused City National Bank in Los Angeles of discrimination by refusing to underwrite mortgages in Black and Latino communities, requiring them to pay fines – the largest redlining settlement in the department’s history.
City National — which has been a subsidiary of Toronto-based RBC since 2015 — is the latest bank in recent years to be found to have systematically avoided lending to racial and ethnic minorities, a practice known as “redlining” that has been regulated by the Biden administration. . raise your own task force for combat.
The Justice Department said that between 2017 and 2020, City National avoided marketing and underwriting mortgages in predominantly Black and Latino neighborhoods in Los Angeles County. Other banks operating in the neighborhood received six times the mortgage applications that City National did, according to federal officials.
The term “redlining” comes from the notion that certain neighborhoods have a symbolic “red line” drawn around them by companies that then avoid serving the area “because of the race, color, or national origin of the residents of that community,” the Department of Justice said.
The Justice Department said City National, a bank with assets of about $95 billion, was so reluctant to operate in a neighborhood where most of its residents were people of color that it opened only one branch in the neighborhood in the past 20 years. By comparison, City National opened or acquired 11 branches during that time. In addition, there are no employees dedicated to mortgage underwriting in these branches, unlike branches in predominantly white neighborhoods.
“Redlining is a practice from the past, contrary to the principles of equality and justice, and has no place in our economy today,” Assistant Attorney General Kristen Clarke, who heads the Justice Department’s civil rights division, said in a statement. “This settlement should send a strong message to the financial industry that lenders are expected to serve all members of the public and will be held accountable if they fail to do so.”
Attorney General Merrick Garland has prioritized civil rights prosecutions since taking over at the Justice Department in 2021 and the department, under the Biden administration, has given a higher priority to redlining cases than it did under previous administrations.
Biden’s task force includes the Department of Justice as well as bank regulators like the Comptroller of the Currency and the Consumer Financial Protection Bureau, and is focused not only on explicit forms of redlining but also on cases where computer algorithms can cause banks to discriminate against Black and Latino borrowers.
Despite half a century of laws designed to combat redlining, the racist practice continued across the country and its long-term effects are still being felt today. The average net worth of a Black family is a fraction of a typical white household, and homes in historically redlined neighborhoods are still worth less than homes in non-redlined communities.
As part of the settlement, City National will create $29.5 million in US loan subsidy funds for loans to Black and Latino borrowers, and spend $1.75 million in advertising, community outreach and financial education programs to reach minority borrowers.
In a statement, City National said it does not agree with the allegations of the Department of Justice, but “However, it supports the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race.”
The Department of Justice said City National co-operated as part of the redlining investigation and used it to resolve problems in other markets, as well.
For more stories about the experiences of Black Canadians – from anti-Black racism to success stories in the Black community – check out Being Black in Canada, a CBC project Black Canadians can be proud of. You can read the rest of the story here.
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