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From Banking and Finance Law Daily, May 27, 2015

Associated Bank and HUD settle ‘redlining’ matter for $200 million

By Thomas G. Wolfe, J.D.

A Wisconsin-based mortgage lender, Associated Bank, N.A., and the U.S. Department of Housing and Urban Development have agreed to resolve HUD’s “redlining” claims under the federal Fair Housing Act against the lender for disparate treatment of minorities. In a May 26, 2015, release, HUD stated that the approximately $200 million settlement not only involved “one of the largest redlining complaints brought by the federal government against a mortgage lender,” it also reflected the “largest settlement of this kind HUD has ever reached.”

According to the “Conciliation Agreement” between Associated Bank and HUD, Associated Bank does not admit violating the FHA or any other federal or state laws, nor does the agreement “constitute evidence of a determination by the Department of any violation” of the FHA or other federal statute or regulation. The Conciliation Agreement’s “Background” section indicates that while Associated Bank’s outside “economic consulting firm” conducted a review of a “substantial subset” of residential loans made by the lender from 2008 to 2011 and “found no evidence of disparate treatment on a prohibited basis,” HUD’s own analysis resulted in different findings. More specifically, HUD’s analysis concluded that, “compared to other lenders, [Associated Bank’s] lending in majority-minority census tracts was lower than in other neighborhoods, and the difference was statistically significant.” HUD’s analysis “covered five metropolitan areas over the time period of 2008 through 2013.”

HUD’s comments. HUD Secretary Julián Castro commented that its settlement with Associated Bank “sends a strong message that HUD does not tolerate practices that unfairly restrict an equal and open housing market.” Saying that discriminatory lending practices “have too often cut off too many credit-worthy families from the opportunities they need to thrive,” Castro indicated that the settlement agreement would “ensure that more Americans can fulfill their hopes and aspirations.”

Associated Bank’s comments. In a recent release, Philip B. Flynn, President and CEO of Associated Bank, remarked, “Associated is pleased to have concluded these discussions and will fully comply with the agreement. Doing so aligns with our ongoing commitment to our customers and communities where we do business. We agree with HUD that we can improve our performance in some of the communities and neighborhoods we serve. We remain committed to the promotion of home ownership and lending in those areas.”

Background. According to the Conciliation Agreement, HUD filed a complaint against Associated Bank, based on data for 2008, 2009, and 2010, that Associated Bank provided in keeping with the Home Mortgage Disclosure Act.

In its complaint, HUD alleged that the mortgage lender “discriminated on the basis of race and national origin by disproportionately denying the loan applications of African-American and Hispanic applicants.” In addition, HUD alleged that Associated Bank “underserved neighborhoods with significant African American or Hispanic populations, despite demand for residential mortgage loans in these neighborhoods.” Accordingly, HUD contended that Associated Bank was not in compliance with the Federal Fair Housing Act.

Settlement agreement highlights. Under the Conciliation Agreement reached between HUD and Associated Bank, during the course of the next three years, Associated Bank is to pay nearly $10 million “in the form of lower interest rate home mortgages and down payment/closing cost assistance to qualified borrowers in majority-minority census tracts in the housing market areas of Chicago; Milwaukee; Minneapolis-St. Paul; Racine, Wisconsin; Kenosha, Wisconsin; and Lake County, Illinois.”

Moreover, over the next three years, Associated Bank is also required by the settlement agreement to:

  • invest approximately $200 million through “increased home mortgage lending activity in majority-minority census tracts” in these areas;

  • provide nearly $3 million to “help existing homeowners repair their properties in these predominantly minority communities;”

  • pay $1.4 million to “support affirmative marketing of loans” in these census tracts;

  • commit $1.35 million for “community reinvestment and fair lending education and training;”

  • open four loan-production offices “in majority-minority census tracts”—with three in the Chicago area and one in the Milwaukee area—“subject to regulatory approval,” in addition to the three branches Associated Bank has “opened or is committed to opening in or near majority-minority census tracts in Chicago, Milwaukee, and Racine since HUD's complaint was filed;” and

  • offer fair housing training to “all its employees and agents with substantial residential lending activity within six months and maintain a second level review process for all denied residential loans.”

In addition, the Conciliation Agreement contains provisions for HUD’s monitoring of Associated Bank’s compliance with the agreement. Similarly, Associated Bank must comply with reporting and recordkeeping provisions of the agreement as well.

Companies: Associated Banc Corp.; Associated Bank, N.A.

MainStory: TopStory CommunityDevelopment EnforcementActions EqualCreditOpportunity Loans Mortgages WisconsinNews

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