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Capital’s Largest S&L Settles Groundbreaking Redlining Case

August 22, 1994

WASHINGTON (AP) _ The largest savings and loan association in the capital’s metropolitan area agreed today to invest $11 million in black neighborhoods to settle unprecedented government charges of mortgage discrimination.

The Justice Department’s civil rights division charged in U.S. District Court that Chevy Chase Federal Savings Bank and its subsidiary, B.F. Saul Mortgage Co., underwrote 97 percent of their loans from 1976 through 1992 in predominantly white areas.

The government, for the first time, charged that they engaged in illegal ″redlining,″ or refusing to lend to blacks by not opening offices or marketing their services in black neighborhoods.

″To shun an entire community because of its racial makeup is just as wrong as to reject an applicant because they are African-American,″ said Attorney General Janet Reno.

The investigation began in June 1993 after The Washington Post in a three- part, computer-assisted series reported on bias in mortgage lending in the area.

At that time, the bank and mortgage company had 92 offices but had opened no offices in any census tracts that had a black majority in the District of Columbia or in neighboring Prince George’s County, Md. Majority black census tracts contain 90 percent of the district’s black population and 75 percent of the county’s black population.

Since the investigation began, the bank has opened seven bank or mortgage company offices in black areas and aggressively sought business in black neighborhoods, the government said.

The bank denied any discriminatory intent on its part and did not admit violating the Fair Housing Act, the Equal Credit Opportunity Act or other laws.

But it agreed to open four offices in black neighborhoods, to consider opening others, to advertise its loans in black areas and continue to recruit black loan officers. That effort was estimated to cost $4 million.

The bank agreed to pay at least $7 million over the next five years by offering special home mortgage loans to all residents of majority black areas of the district and the county. The offering will make home loan financing available at either 1 percent less than the prevailing rate or 0.5 percent below the market rate combined with a grant to be applied to the down payment. The $7 million subsidy will support home loans totaling about $140 million.

The proposed settlement also was filed in U.S. District Court and requires a judge’s approval, which is considered likely.

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