CIVIL ACTION NO. 04C 4585
This Order resolves the claims of the United States that the
defendant, First American Bank (the Bank), has violated the Fair
Housing Act (FHA), 42 U.S.C. §§3601-3619, and the Equal Credit
Opportunity Act (ECOA), 15 U.S.C. §§1691-1691f, by discriminating
on the basis of race, color, and national origin in the extension
of residential real estate-related credit, consumer loans, and
small business loans in the Chicago and Kankakee, Illinois,
metropolitan areas.
The United States contends that the Bank has avoided
marketing itself and doing business in minority census tracts in
the Chicago and Kankakee metropolitan areas because of the race
or national origin of the people residing in those tracts (1) - a
practice commonly referred to as redlining. According to the
Complaint, the Bank's policies and practices have denied an equal
opportunity to the residents of minority census tracts, because
of the racial and ethnic composition of those tracts, to obtain
all types of credit - home mortgage, home equity, auto and other
consumer loans, and small business financing. (2)
Under the provisions of this Order, the Bank has committed
itself to a program to improve its performance in meeting the
credit needs of residents in minority census tracts. The Bank
will ensure that its lending products and services are marketed
and made available in minority census tracts on no less favorable
a basis than in white residential areas. The Bank commits itself
to take all reasonable, practicable actions, consistent with
safety and soundness, to increase the level of residential real
estate-related, consumer, and small business lending in minority
census tracts. The remedial plan to achieve this objective,
detailed in subsequent sections of this Order, includes the
opening of new branches in minority census tracts, investment in
those areas through subsidized loan offerings, targeted marketing
programs, and expanded outreach and education efforts in minority
census tracts in order to remedy the effects of the Bank's
alleged discriminatory practices in the Chicago and Kankakee
metropolitan areas.
First American denies the United States' allegations and
maintains that at all times it conducted its lending in
compliance with the letter and spirit of fair lending laws and in
a non-discriminatory manner.
There has been no factual finding or adjudication with
respect to any matter alleged by the United States. Accordingly,
the execution of this Order is not, and is not to be considered
as, an admission or finding of any violation of the FHA or the
ECOA by the Bank. Rather, the parties have entered into this
agreed Order to resolve voluntarily the claims asserted by the
United States in order to avoid the risks and burdens of
litigation.
- Additional Branch Locations
The United States recognizes that First American has taken
steps in anticipation of opening four new branch offices located
in minority census tracts. The Bank has already purchased three
sites in majority African-American census tracts and will open
three new branch offices in majority African-American census
tracts before the end of 2004, subject to obtaining local
government permits and approvals and the approval of the Federal
Deposit Insurance Corporation or other appropriate federal
regulatory agency. In addition, the Bank has informed the United
States that it has identified one additional site for a new
branch in a majority Hispanic census tract. The Bank shall open
a branch in a majority Hispanic census tract within three years
of the date of this Order. If it becomes impracticable to open
the branch in the location identified above within three years of
the date of this Order, the Bank shall immediately inform the
United States upon making this determination and shall present to
the United States a proposal for an alternate new branch in a
majority Hispanic census tract. In any event, one branch shall
be opened before this decree terminates in a majority Hispanic
census tract.
The four new branches shall provide the full range of
services and hours of operation typically offered at the Bank's
other branches, including, but not limited to, a full range of
residential mortgage, consumer, and small business lending
services as well as full-service ATMs.
Nothing in this Order precludes the Bank from opening or
acquiring additional offices in minority census tracts beyond the
four specified above. The Bank agrees that it shall continue to
evaluate future expansion opportunities in minority census tracts
in order to fulfill the goals of this Order and shall inform the
United States of the location of any other new branch office
planned or opened in minority census tracts during the term of
this Order as part of its annual report.
- Automated Teller Machine (ATM) Locations
The Bank will continue to deploy deposit-taking ATMs at all
branches as reaffirmed in the Bank's policy adopted by the Board
of Directors on January 27, 2004. Pursuant to that same policy,
off-premises ATM deployment will continue to be targeted
principally in high rise office buildings or the central business
district of the City of Chicago. The Bank shall deploy off-premises deposit taking ATMs in its assessment area on the basis
of objective, nondiscriminatory criteria.
- Staff
For the duration of this Order, the Bank shall employ a
full-time Director of Community Lending (or equivalent title),
whose primary responsibilities will include overseeing the
development of the Bank's residential, consumer, and small
business lending in minority census tracts. The Director will
supervise the activities of loan officers regarding the
solicitation and origination of residential real estate-related,
consumer, and small business loans in minority census tracts,
including the special loan programs identified in this Order;
coordinate the Bank's involvement in community lending
initiatives and outreach programs; serve as a resource to lending
staff to encourage the origination of more home mortgage, home
equity, consumer, and small business loans within minority census
tracts; and report directly to the Bank's senior management on
the progress of these initiatives at least quarterly, including
recommending changes in these programs to increase their
effectiveness.
The Bank shall continue to provide periodic training to all
employees and agents with significant involvement in residential
real estate-related transactions, and home equity, consumer, and
small business lending, to ensure that their activities are
conducted in a non-discriminatory manner. This training shall
continue to encompass their fair lending obligations under the
FHA, the ECOA, and the CRA, as well as under this Order. Such
training shall take place on at least an annual basis, and may be
accomplished by lectures, staff meetings, videotapes, computer-
based programs, regulatory updates, outside speakers, or other
means. In addition, within thirty (30) days of the entry of this
Order, the Bank shall provide to all such employees an
explanation and copies of the applicable provisions of this
Order, and allow an opportunity for such employees to have any
questions concerning the Order answered.
- Advertising and Outreach
The Bank shall continue and expand its marketing and
outreach program designed to improve its performance in meeting
the credit needs of the residents of minority census tracts in
the Chicago/Kankakee metropolitan areas. This program shall be
specifically targeted to generate significant additional
applications for all types of its credit products from qualified
residents of and small businesses located in minority census
tracts. This program shall include, at a minimum, the following
components, although the Bank remains free to undertake on its
own initiative additional marketing and advertising efforts
designed to achieve these goals:
(a) Print Media. Subsequent to the Board's 2001 fair
lending examination, the Bank commenced advertising in La Raza,
and Hoy!, news publications targeted to Hispanic readers, and in
the Chicago Sun-Times, South Zone edition, a general circulation
newspaper reaching many African-American readers. During the
term of this Order, in addition to any other advertising, the
Bank shall continue to advertise in the Chicago Sun-Times, South
Zone edition and at least one print medium specifically directed
to African-American readers, and one print medium directed to
Hispanic readers. These advertisements, viewed in their entirety
over the course of a year, shall include the Bank's full range of
principal credit products, including any special products or
services made available as part of its actions under this Order. (3)
The Bank may choose further to expand its targeted advertising by
publishing in additional print media directed to African-American, Hispanic, or other minority readers. The Bank retains
the discretion to determine the size, content, and frequency of
such advertising in order to achieve these goals. In appropriate
publications, the text of some of the advertisements shall be in
Spanish or other foreign languages commonly used in minority
census tracts.
(b) Radio. Subsequent to the Board's 2001 fair lending
examination, the Bank commenced advertising on radio station
WVAZ, which has programming oriented to African-American
listeners. During the term of this Order, the Bank shall place
radio advertisements on at least three minority-oriented Chicago-area radio stations, at least one of whose programming is
oriented toward African-American listeners and another which is
oriented toward Hispanic listeners. The radio advertising,
viewed in its entirety over the course of a year, shall include
the Bank's full range of principal loan products, including any
special products or services made available as part of its
actions under this Order. The Bank retains the discretion to
determine the content and frequency of such radio spots in order
to achieve these goals.
(c) Promotional Materials. The Bank shall create point-of-sale materials, such as posters, on-site illuminated billboards (including Panaflex billboards), and brochures, to advertise
products and services it offers, including any special products
or services made available as part of its actions under this
Order. These materials shall be published in English, Spanish,
and other foreign languages commonly used in the minority census
tracts. The Bank will place or display these promotional
materials in appropriate distribution locations throughout
minority census tracts.
(d) In connection with the opening of each of the four new
branches discussed in §II.C.1, the Bank may also utilize direct
mailings to advertise the new branch and its loan products to
residents and small businesses in the minority census tracts
within the neighborhoods surrounding each branch.
(e) The Bank shall spend a minimum of $400,000 on the
advertising and marketing campaign described in paragraphs (a),
(b), (c), and (d) over the term of this Order.
(f) All of the Bank's print advertising and promotional
materials shall contain an equal housing opportunity logotype,
slogan, or statement. All of the Bank's radio and television
advertisements shall include the audible statement "Equal Opportunity Lender".
- Credit Needs Assessment
On or before the second anniversary of the entry of the
Order, First American will undertake actions to assess the Bank's
progress in meeting the goals of this Order and other measures
the Bank has instituted to meet the credit needs of minority
communities in the Chicago and Kankakee MSAs. This assessment
shall include: (a) consideration of how the Bank's home
mortgage (4), home equity, consumer, and small business lending
operations are serving the minority communities of the Chicago
and Kankakee MSAs; and (b) a review of the availability of
relevant federal, state, and local governmental programs and an
evaluation of how the Bank's participation in each of them is
assisting or would assist in achieving the goals of this Order.
In accomplishing this assessment, Bank representatives shall
meet with representatives of at least four (4) Chicago-area and
two (2) Kankakee-area community organizations significantly
involved in promoting fair lending and/or home ownership or
development in minority census tracts. These meetings shall
include consideration of the extent to which the Bank's credit
products and services are meeting the credit needs identified by
those community organizations and how, if at all, they could be
improved. The Bank may also meet with representatives of any
other public or private entities it chooses in undertaking this
credit needs assessment.
The Bank shall present a written report of this special
credit needs assessment to the United States, together with a
plan and timetable for any additional actions to be taken, not
later than six (6) months after the second anniversary of the
entry of this Order.
- Consumer Education
The parties acknowledge that financially educated consumers
are an essential component of the Bank's ability to achieve its
goal of sustained increases in home mortgage, home equity,
consumer, and small business lending in minority census tracts in
the Chicago and Kankakee metropolitan areas. To help identify
and develop qualified loan applicants from minority census
tracts, the Bank shall invest a minimum of $300,000 over the term
of this Order to provide credit counseling, financial literacy,
business planning, and other related educational programs
targeted at the residents and small businesses of these areas. (5)
The Bank shall allocate a minimum of one-half of the
$300,000 to sponsor such programs offered by public-interest or
non-profit community organizations. Such programs shall be
available in English, Spanish, and other foreign languages
commonly used in the minority census tracts.
- Community Reinvestment Act Assessment Area
In March 2001, the Bank revised its CRA assessment area to
include all of the Chicago and Kankakee MSAs. The Bank shall
continue to include the entirety of those two MSAs in its CRA
assessment area. Nothing in this Order precludes the Bank from
expanding its CRA assessment area in the future in a manner
consistent with the provisions of the CRA and its implementing
regulations.
III. SATISFACTION OF UNITED STATES' CLAIMS FOR MONETARY RELIEF
In addition to the monetary commitments detailed above, the
Bank will invest a minimum of $5.0 million over the duration of
this Order in the special financing program described below for
home mortgage, home equity, CRA small business, community
development, and consumer lending. (6) When combined with the other
financial commitments described herein, this special lending
program will satisfy fully the claims of the United States for
damages and other monetary relief in this case.
Through this special financing program for these
categories of loans, the Bank will offer qualified residents of
(for home mortgage, home equity, and consumer loans), and
businesses (for CRA small business loans and community
development loans (7)) located in minority census tracts, loan
products at interest rates that are more advantageous to the
applicant than normally would be provided. The Bank will
subsidize each such transaction by means of offering an interest
rate below that which the Bank would normally charge. In
operating this special financing program, the Bank shall exercise
its underwriting discretion in a manner which maximizes the
likelihood that it will originate a loan to a qualified
applicant, consistent with applicable underwriting guidelines and
safety and soundness standards.
First American shall provide to any applicant qualified for
a particular loan product an interest rate of a minimum of ½ of a
percentage point (50 basis points) below the standard interest
rate then set by the Bank for that product. (8)
The Bank shall have discretion to provide the loan subsidy
among its various loan products specified in this Order; however,
the Bank shall use its best efforts to implement its subsidy
program in a manner such that, of the total dollar volume of
loans each year subsidized by this special program, 30% are CRA
small business loans and community development loans.
If the Bank reaches a $1.0 million investment level before
the end of any one-year period for the loan subsidy program, it
may, in its discretion: (a) withhold any additional funding for
the special financing program for the remainder of that period;
or (b) consistent with safety and soundness considerations,
exceed that figure for the year. If the Bank exceeds a $1.0
million investment level for any one-year period, the surplus
shall be credited toward its commitment for the following years.
If the Bank does not invest $1.0 million in this program in any
one-year period, the shortfall shall be added to its commitment
for the following years. If, at the end of five (5) years, the
Bank has not expended the full amount of its $5.0 million
commitment, it shall extend this special financing program until
it has expended the full amount.
Although any resident of, or any business located in, any of
the minority census tracts may be eligible for assistance under
this special financing program, the Bank shall take appropriate
steps to promote an equitable distribution of these investment
funds widely among minority census tracts. This discretion
includes the authority to designate a certain amount of this
funding at any time for residents of certain tracts within the
entire area in order to prevent a disproportionate concentration
of the Bank's investment under this program in a relatively small
geographic area.
No provision of this Order, including this special financing
program commitment, requires the Bank to make any unsafe or un-sound loan. During the term of this Order, the Bank shall assess
the effectiveness of this special financing program in achieving
its goal and shall recommend to the United States changes
necessary and appropriate to increase its effectiveness.
IV. EVALUATING AND MONITORING COMPLIANCE
For the duration of this Order, First American shall retain
all records relating to its obligations hereunder, including its
home mortgage, home equity, consumer, small business, and
community development lending activities, as well as its
advertising, outreach, branching, special programs, and other
compliance activities as set forth herein. The United States
shall have the right to review and copy such records upon
request. This Order shall not be interpreted to require the Bank
to deviate from its ordinary document retention procedures with
respect to its business activities in areas other than those
related to its obligations under this Order.
The Bank shall annually provide to counsel for the United
States the data it submits to the Federal Financial Institutions
Examination Council (FFIEC) pursuant to the Home Mortgage
Disclosure Act and the Community Reinvestment Act. The data will
be provided in the same format in which it is presented to the
FFIEC within thirty (30) days of its submission to the FFIEC each
year for the duration of this Order.
In addition to the submission of any other plans or reports
specified in this Order, the Bank shall make an annual report to
the United States on its progress in fulfilling the goals of this
Order. Each such report shall provide a complete account of the
Bank's actions to comply with each requirement of this Order
during the previous year, an objective assessment of the extent
to which each quantifiable obligation was met, an explanation of
why any particular component fell short of meeting its goal for
that year, and any recommendations for additional actions to
achieve the goals of this Order. The Bank shall submit this
report each year for the term of this Order within forty-five
(45) days of the anniversary of the date of the entry of this
Order. In addition, the Bank shall attach to the annual reports
representative copies of training material and advertising and
marketing materials disseminated pursuant to this Order.
V. ADMINISTRATION
This Order shall be binding on the Bank, and all of its
officers, employees, agents, representatives, assignees,
subsidiaries, and successors in interest.
This Order shall terminate (a) three months after the
submission of the Bank's fifth annual report to the United
States; (b) if the Court grants a joint motion by the parties to
terminate the Order prior to that date, which motion may be
proposed by First American at any time after the Order has been
in effect for four years, if the Bank has fully complied with all
its terms (9); or (c) if the Bank has not invested $5.0 million in
its special financing program in five (5) years from the date of
entry of this Order, three months after the submission of the
Bank's final annual report to the United States. It shall only be
extended upon written agreement of the parties or, upon motion of
the United States to the Court, for good cause shown.
This Order may be modified at any time, upon approval of the
Court, by written agreement of the Bank and the United States.
The parties recognize that there may be changes in relevant and
material factual circumstances during the term of this Order
which may impact the accomplishment of its goals. The parties
agree to work cooperatively to discuss any proposed modifications
to this Order.
In the event that any disputes arise concerning the
interpretation of or compliance with the terms of this Order, the
parties shall endeavor in good faith to resolve any such dispute
between themselves before bringing it to this Court for
resolution. The United States agrees that if it reasonably
believes that the Bank has violated any provision of this Order,
it will provide the Bank written notice thereof and give it
thirty (30) days to resolve the alleged violation before
presenting the matter to this Court. In the event of either a
failure by the Bank to perform in a timely manner any act
required by this Order or an act by the Bank in violation of any
provision hereof, the United States may move this Court to impose
any remedy authorized by law or equity.
The Bank's compliance with the terms of this Order shall
fully and finally resolve all claims of the United States
relating to the Bank's alleged violation of the fair lending laws
by means of discriminating on the basis of race, color, or
national origin, including all claims for equitable relief and
monetary damages and penalties. Each party to this Consent Order
shall bear its own costs and attorney's fees associated with this
litigation.
The Court shall retain jurisdiction for the duration of this
Consent Order to enforce the terms of the Order, after which time
the case shall be dismissed with prejudice.
SO ORDERED, this _____ day of ___________, 2004.
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______________________________________
UNITED STATES DISTRICT JUDGE
The undersigned hereby apply for and consent to the entry of this
Order:
|
For First American Bank: |
For the United States:
Alexander R. Acosta
Assistant Attorney General |
______________________________
Andrew L. Sandler, Esq.
Benjamin B. Klubes, Esq.
Skadden, Arps, Slate, Meagher
& Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Tel: (202)371-7000
Fax: (202)393-5760
______________________________
Jonathan S. Feld, Esq.
KMZ Rosenman
Suite 1600
525 West Monroe Street
Chicago, IL 60661-3693
Tel: (312)902-5200
Fax: (312)902-2050
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______________________________
Steven H. Rosenbaum
Chief
______________________________
Donna M. Murphy
Deputy Chief
______________________________
Valerie R. O'Brian
Burtis M. Dougherty
Attorneys
Housing and Civil
Enforcement Section - NWB
Civil Rights Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, D.C. 20530
Tel: (202)514-4751
Fax: (202)514-1116
Patrick J. Fitzgerald
United States Attorney
Joan Laser
Assistant U.S. Attorney
219 South Dearborn Street
Chicago, Illinois 60604
Tel: (312)353-1857
Fax: (312)886-4073
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1. For purposes of this Order, minority census tracts are
defined as those which have a 50% or greater minority population,
with "minority" including all persons who are other than non-Hispanic white. Minority census tracts in the Chicago and
Kankakee Metropolitan Statistical Areas (MSAs) are listed by
number in Exhibit A hereto, based on 2000 census data. The
Chicago MSA is comprised of the following counties: Cook, Lake,
McHenry, Kane, DuPage, Grundy, Kendall, DeKalb, and Will. The
Kankakee MSA, located immediately south of the Chicago MSA, is
comprised of Kankakee County.
2. In January 2001, the Federal Reserve Board (the Board),
then the Bank's regulator, conducted a periodic fair lending
examination of the Bank and found reason to believe that the Bank
had engaged in a pattern or practice of discrimination on the
bases of race and national origin and, in May 2002, referred the
matter to the Department of Justice, pursuant to 15 U.S.C.
§1691e(g). The Board determined that the Bank redlined minority
census tracts in the Chicago and Kankakee, Illinois, metropolitan
areas, and engaged in practices which prevented or discouraged
the residents of minority census tracts from obtaining equal
access to credit because of the race or national origin of the
majority of the tract's residents.
3. The Bank need not include every credit product it offers
in each advertisement, but must include in this advertising over
the course of a year the Bank's principal products and all
special credit products or programs available under the terms of
this Order.
4. The term "home mortgage" in this Order refers to all types
of residential credit, including home purchase, refinance, and
home improvement loans.
5. All the costs associated with the development and
implementation of this consumer education initiative, including
the expenses of employees engaged in the effort may be included
in the calculation of the amount invested by the Bank.
6. With respect to the Bank's home mortgage subsidy program,
no loan originated under this program shall exceed the conforming
loan limit applicable to Fannie Mae and Freddie Mac, as deter-mined annually by the Federal Housing Finance Board (currently
$333,700).
7. In this Order, community development loans are defined as
those which meet the definition set forth in Federal Reserve
Board Regulation BB, 12 CFR 228.12(h)(3): "activities that
promote economic development by financing businesses or farms
that meet the size eligibility standards of the Small Business
Administration's Development Company or Small Business Investment
Company programs (13 CFR 121.301) or have gross annual revenues
of $1 million or less."
8. For purposes of this Order, the loan subsidy amount
calculation will be the reduction in the monthly payment from the
standard monthly payment based on the borrower's qualifications
which result from the interest rate reduction the borrower
receives (amortized over the full term of the loan) times the
number of monthly payments for the time periods as set forth
below for various loan types:
(a) First mortgages at 7.5 years;
(b) Home equity loans and lines of credit at 5 years; and,
(c) Small business and community development loans at the
term of the note (generally 1 to 5 years).
9. The United States shall not refuse to join the Bank's
motion if it concludes that the Bank has fully complied with all
the provisions of this Order.
Document Filed: July 13, 2004
