The Justice Department announced a proposed consent order with mortgage lender Lakeland Bank over alleged discriminatory practices that authorities say excluded potentially thousands of Black and Hispanic homebuyers in the Newark, N.J., area from obtaining mortgages.
A DOJ investigation found that between 2015 and 2021, Lakeland engaged in the discriminatory practice known as redlining in three of the most diverse counties in north New Jersey—Essex, Union and Somerset—with business practices that deliberately shunned Black and Latinx consumers and communities.
The bank, authorities said in a complaint filed in U.S. District Court in New Jersey, violated the Fair Housing Act and the Equal Credit Opportunity Act by opening branches in majority white neighborhoods while avoiding having a physical presence in majority Black and Hispanic communities nearby, refusing to advertise or promote home loans to Black and Hispanic potential borrowers and discouraging qualified Black and Hispanic borrowers while routinely lending to similarly-qualified white customers.
“The bank in-effect drew a red line around Black and Hispanic communities in Newark,” said U.S. Attorney Philip R. Sellinger during a Zoom call announcing the consent agreement. “There were qualified borrowers in these areas, but Lakeland just didn’t service them.”
Kristen Clarke, the Assistant Attorney General over the Justice Department’s Civil Rights Division, said that the charges against Lakeland grew out of a broader initiative the feds launched last year to aggressively investigate potential instances of lender discrimination. That effort is ongoing, she said.
Under the consent agreement, Lakeland has to create a $12 million fund to subsidize mortgages, home improvement loans or home equity loans for Black and Hispanic customers in the Newark area. The money can be used to give up to $15,000 in closing cost, downpayment, mortgage insurance or interest-rate assistance to borrowers.
The bank also has to spend up to $150,000 per year on advertising or education initiatives to Black and Hispanic consumers in the Newark area and up to $400,000 on services “that increase access to residential mortgage credit.”
Lakeland has 120 days to submit a written plan addressing the steps it intends to take to rectify its lending practices. It must provide anti-discrimination training for bank executives, branch managers and other employees involved in the lending process. It has to hire a community development officer, an executive level role whose primary responsibility is overseeing lending in Black and Hispanic neighborhoods in the Newark area.
The bank also has 18 months to open at least two new physical branches in majority Black or Hispanic neighborhoods in the Newark area, and hire at least four loan officers to specifically solicit loan applications from Black and Hispanic consumers.
Lakeland, based in Newfoundland, N.J., has $10.4 billion in assets and operates 68 branches in the state. Of those, 23 were in the Newark area, but none, the Justice Department said, are in majority Black or Hispanic neighborhoods.