The New York Department of Financial Services (DFS) recently announced that it has concluded an agreement with Hunt Mortgage, a licensed mortgage banker, to respond to DFS findings that there was a “manifest lack of minority and majority minority loans in western and central New York City by Hunt Mortgage.” DFS also released a report on redlining in Metro Buffalo.

Hunting agreement. The agreement relates to Hunt’s residential mortgage lending practices and stems from DFS ‘review of Hunt’s HMDA data from 2016 to 2019. It states that DFS reviewed Hunt’s Fair Lending Policies, training material on Hunt’s fair loan, marketing and advertising policies, marketing efforts, marketing materials, and underwriting and pricing procedures, as well as additional loan data provided by Hunt, and gathered testimonials from Hunt officials. While the DFS found no evidence of intentional discrimination or found any fair loan violations, it did find weaknesses in Hunt’s fair loan and compliance programs. Specifically, he found that Hunt made no effort to define the areas it serves, did not track marketing efforts, including where the marketing material was sent, and did not has made no focused effort to ensure that it serves all races and classes equally.

The agreement sets out the steps Hunt has agreed to take “in good faith” to increase its residential loans to minorities and majority-minority neighborhoods. These steps include the following:

  • Updated Hunt’s Fair Lending Policy to (1) reflect the lending areas Hunt serves by specifically defining the lending areas it will target (lending area) to include certain metropolitan statistical areas, (2) include a goal of directing 25% of marketing and advertising material to neighborhoods or minority communities, and (3) explaining how Hunt’s marketing and advertising statistics will be measured, tracked and reported to DFS.
  • Invest $ 50,000 in advertising and marketing designed to reach potential applicants who reside in majority minority census tracts of the lending area. Marketing must include, at a minimum, the following:
    • Organize quarterly awareness events for residents of majority minority neighborhoods to inform attendees of Hunt’s products and services, these events being aimed at neighborhood residents, real estate brokers and agents, developers and public or private entities carrying out activities related to residential real estate in majority minority neighborhoods.
    • Create distribution point materials, such as posters, billboards and brochures aimed at minority communities to advertise Hunt’s products and services, such materials to be displayed at Hunt branches and other suitable locations in majority minority neighborhoods in the Surface lending area.
    • Distribute direct mail advertising to residents of majority minority neighborhoods in the lending area.
    • Distributing advertisements through Hunt’s website and using other online advertising mediums targeting minority borrowers and residents of majority minority neighborhoods in the lending area, such as web banner ads, text advertising, sponsored search engine results, social media, mobile advertising and email advertising.
    • Offers and advertises credit counseling services.
  • Implement a consumer complaints policy, with a board member appointed to review all complaints on a monthly basis and brief the board.
  • Establish a special financing program to provide discounted or subsidized financing on loans to minority borrowers, with the total amount of remittances and grants to be at least $ 150,000 over a three-year period.
  • Engage an independent third party to conduct an annual audit of Hunt’s fair lending practices, general compliance efforts, and compliance with the agreement.

The DFS redlining report discussed below confirms our understanding that DFS is pursuing fair loan investigations on at least two non-bank mortgage lenders. In the report, the DFS says it used HMDA data to inform fair lending surveys of other lenders who lend heavily to white borrowers and provide loans to minority borrowers and in majority minority areas. at a significantly lower number than other institutions in Metro Buffalo. According to the report, these investigations are ongoing and the DFS will announce the findings as these cases are resolved. DFS notes, however, that it has found that many businesses “suffer from the same fundamental failure: a general lack of attention to whether they are serving the entire Buffalo community, including minorities and majority minority neighborhoods.” . DFS says these companies “generally make little or no effort to get business in minority areas, do not have adequate fair loan compliance programs, and do not track whether or to what extent they are serving minority populations.” .

Highlight report. Based on DFS’s analysis of HMDA data for lenders in the Buffalo market, the report includes the following conclusions:

  • Although minorities make up about 20% of the population of Metro Buffalo, only 9.74% of total loans in the Buffalo market are made to minorities.
  • Non-bank mortgage lenders in the Buffalo market have loaned at lower rates in majority-minority neighborhoods than deposit-taking institutions.

The report includes the following recommendations:

  • New York’s Community Reinvestment Act only applies to banks. Since the majority of loans nationwide are made by non-bank mortgage lenders, a significant portion of the mortgage market is exempt from CRA requirements. Accordingly, the New York CRA should be amended to apply to non-bank mortgage lenders.
  • The New York State Department should investigate real estate agents who refer their clients to non-bank lenders to determine whether the agents engage in prohibited discriminatory activities that could affect mortgage lending trends.