Redlining Accusations Leveled at CIT's OneWest Bank

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Two consumer advocacy groups in California have accused CIT Group's OneWest Bank of failing to provide mortgages and other financial services in minority neighborhoods.

The California Reinvestment Coalition and the Fair Housing Advocates of Northern California have filed a redlining complaint with the Department of Housing and Urban Development, requesting an investigation into potential Fair Housing Act violations.

CIT is based in Livingston, N.J., and operates about 70 OneWest branches across California. Most of the branches are in predominantly white neighborhoods and have provided very few mortgages to minority borrowers, according to the complaint. The groups also accused CIT of failing to properly maintain foreclosed properties in underserved neighborhoods.

"We call on HUD to fully investigate CIT's redlining practices and to hold the bank accountable for its actions, and the harm it has caused to communities," Kevin Stein, deputy director of the California Reinvestment Coalition, said in a news release Thursday.

A CIT spokesman did not address the complaint directly but said the company "is committed to fair lending and works hard to meet the credit needs of all communities and neighborhoods we serve."

The track record of OneWest, long a flashpoint for controversy, has received fresh attention in recent days because President-elect Donald Trump's candidates for Treasury secretary are said to include Steven Mnuchin, who was instrumental in transforming the failed mortgage lender IndyMac into OneWest. Community groups have long criticized the bank for ignoring the needs of underserved communities.

According to the complaint, just under a third of all mortgages originated at OneWest in 2015 were originated in minority census tracts, compared with an industry average of about 50%.

Additionally, the two groups included observations about the quality of OneWest's real-estate-owned properties between April 2014 and May 2016. Foreclosed homes in white neighborhoods were "generally well maintained and well marketed, with manicured lawns and securely locked doors." Similar properties in communities of color appeared blighted and had "trash strewn across the premises," the complaint said.

The complaint adds to a slew of headaches for the $65 billion-asset CIT, which acquired OneWest in August 2015. CIT's reverse mortgage servicing business, known as Financial Freedom, is under investigation by HUD amid questions about its accounting practices. The company plans to leave the business.

CIT is also in the midst of a broader restructuring. It is divesting several international businesses, including its $10 billion-asset aircraft leasing division, as it looks to become a more traditional commercial bank.

Consumer groups, including the California Reinvestment Coalition, have criticized the acquisition of OneWest, arguing that the company has ignored the needs of underserved communities.

In approving the deal, regulators required CIT to submit an updated plan to comply with the Community Reinvestment Act.

This article originally appeared in American Banker.
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