The Department of Housing and Urban Development has reached an agreement with First-Citizens Bank & Trust Co. in Raleigh, N.C., to settle alleged fair lending violations.
HUD filed its initial complaint in 2011 after reviewing 2010 Home Mortgage Disclosure Act data. HUD claims that the bank denied mortgages to African-American and Hispanic mortgage applicants at a disproportionately higher rate than white applicants.
The loans were originally denied by the automated underwriting system and then subsequently denied manually.
HUD argues that its analysis demonstrates "that preferential treatment of white applicants was not sufficiently justified by the identified factors," according to the agreement.
A spokeswoman for First Citizens said that the bank cooperated with HUD's investigation.
"The agreement does not admit any liability and the positive efforts the bank has made in the past and continues to make to providing homeownership opportunities in underserved communities," she said.
As part of the settlement, all First Citizens employees and agents involved substantially in the manual underwriting of mortgages must attend four hours of fair lending training within three months of the agreements and annually thereafter. The training, which can occur via webinar, must be conducted by a HUD-approved independent third party.
First Citizens is also expected to develop and document more standardized, specific and objective guidelines for the manual secondary review process of retail channel residential loan applications that were initially denied by the automated system to prevent against discriminatory judgments.
Additionally, HUD required First Citizens to hire three mortgage banker market specialists to deliver a "special purpose credit product" to metropolitan areas in South Carolina, including Charleston, Columbia and Greenville. The bank must either make at least 50 of these special purpose credit loans or receive at least 125 completed applications for the product in the identified regions, per the agreement.
The special purpose credit product was an existing portfolio loan, previously only offered in North Carolina, designed to help with community lending efforts, the bank's spokeswoman said.
Through the agreement, First Citizens said it will make at least $140,000 available to nonprofit organizations in South Carolina that provide credit and housing counseling, financial literacy training, and related programs to first-time homebuyers. First Citizens further agreed to spend $20,000 during the three-year term of the agreement on affirmative marketing, advertising and outreach to residents in majority-minority communities in South Carolina.
