First Federal Bank settles redlining complaints with $2.5 million loan program

Redlining complaints against First Federal Bank of Kansas City have led to a settlement aimed at creating $2.5 million worth of home loans in majority African-American neighborhoods.

The U.S. Department of Housing and Urban Development mediated the settlement, which originated from complaints by the Concerned Clergy Coalition of Kansas City and the Historic East Neighborhoods Coalition of Kansas City.

Both groups hailed the lending agreement as helping to address the needs of their constituents.

“We need local banks as partners in the process of revitalization, and we look forward to working with First Federal Bank and other banks to begin to address the grave challenges the community faces with our housing stock,” the Rev. Jefferson Edwards of Concerned Clergy said in a statement.

In the statement, Joseph Jackson of the Historic East Neighborhoods Coalition called the agreement “an important first step in bringing back bank financing to our community to needed levels.”

First Federal agreed to make the $2.5 million in mortgage loans over three years, provide $105,000 to a pool that helps rehabilitate houses in distressed areas of Kansas City, spend $15,000 or more in marketing to African-American communities for three years, support financial education for African-American communities and pay $50,000 to the two agencies that complained.

“We are committed to expanding our presence into all Kansas City communities, and believe this agreement is a bold step in furtherance of our mission to help all of our customers and communities prosper,” J.R. Buckner, president and chief executive of the bank, said in an announcement of the loan program.

It said the affordable mortgage subsidy program includes down payment assistance of up to $2,500 for qualified borrowers. It also said the bank has a long history of complying with fair lending laws.

HUD became involved after Legal Aid of Western Missouri and the Metropolitan St. Louis Equal Housing and Opportunity Council took the local complaints to the federal agency.

A statement from HUD said the groups argued that First Federal failed to penetrate markets in Kansas City’s urban core and excluded areas with a concentration of African-American residents from its service area. HUD said the complaint was that the bank’s practices made “residential real estate products less available to persons based on race, a practice commonly known as redlining.”

In a 12-page conciliation agreement, the bank denied having discriminated against the groups who complained but agreed to settle the claims.

The bank also agreed to appoint a community development leader focused on low- and moderate-income communities and African-American neighborhoods.

First Federal also agreed to keep three branches open in census tracts with a majority of minority residents if it gains regulatory approval of its planned merger with Inter-State Federal Savings and Loan Association of Kansas City, Kan.

With the agreement, the groups sent a letter to regulators supporting the bank merger.

This story was originally published February 29, 2016 at 11:48 AM with the headline "First Federal Bank settles redlining complaints with $2.5 million loan program."