Patriot Bank to pay $1.9M to settle DOJ’s redlining accusations

Tennessee-based community bank Patriot Bank agreed to pay $1.9 million to resolve allegations from the Department of Justice (DOJ) that it engaged in redlining discriminatory practices.

The DOJ alleged that from 2015 through at least 2020, Patriot avoided providing mortgage services to majority-Black and Hispanic neighborhoods in Memphis, Tennessee and discouraged people seeking credit in those communities from obtaining home loans.

Over the same six-year period, other banks received nearly 3.5 times as many loan applications compared to Patriot in majority-Black and Hispanic neighborhoods in Memphis, Tennessee according to its complaint filed in the U.S. District Court Western District of Tennessee Western Division in January. 

Even when Patriot generated loan applications from majority-Black and Hispanic areas, the applicants themselves were disproportionately white, prosecutors alleged.

Patriot Bank denied any allegations of redlining.

“Patriot Bank has always acted to serve the home mortgage credit needs in minority neighborhoods, and the bank’s strong record speaks for itself and flatly contradicts any allegation of wrongdoing,” John Smith, president and CEO of Patriot Bank, in a statement.

“We are proud of our record and strongly deny that Patriot Bank ever avoided originating home mortgage loans in Black and Hispanic areas of the Memphis market.” 

The bank claims that Patriot ranked 14th out of 482 lenders in making mortgage loans in minority areas of Memphis in 2021 and 15th out of 534 lenders in 2022. 

Patriot Bank added: “The bank entered into a consent order with the DOJ because the terms of the agreement affirm and adopt the programs and actions that the bank has already been implementing on its own for many years to help meet mortgage credit needs in the communities it serves, including its investment of $1.9 million in reaching and serving communities of color, as the consent order itself states.”

Of the $1.9 million investment Patriot will make, subject to court approval, 

  • At least $1.3 million will go towards loan subsidy fund to increase access to home mortgage, home improvement and home refinance for residents of majority-Black and Hispanic neighborhoods
  • About $375,000 will be allocated for advertising, outreach, consumer financial education and credit counseling focused on majority-Black and Hispanic neighborhoods
  • Some $250,000 will be spent on community partnerships to provide services that increase residential mortgage credit access for residents of those neighborhoods.

In addition, Patriot Bank is required to have at least two mortgage loan officers to serve majority-Black and Hispanic neighborhoods in the Bank’s service area and employ a director of community lending – responsible for development of lending in communities of color. 

“The Justice Department is dedicated to stamping out discriminatory lending practices across this country and we are vigorously committed to holding lenders accountable, no matter their size. This settlement will provide many Memphis families with access to credit that will improve the quality of their lives while opening up opportunities to build intergenerational wealth,” said assistant attorney general Kristen Clarke of the DOJ’s civil rights division.

Mortgage tech platform Modex shows that Patriot Bank produced about $149 million in mortgage loans over the last 12 months through 17 active loan officers and 9 branches.

Patriot Bank is the 11th lender to reach a settlement with the DOJ over redlining discriminatory practices.

In October 2021, the DOJ launched an initiative to combat redlining – a coordinated enforcement effort to address this persistent form of discrimination against communities of color. 

Since 2021, the department has secured more than $109 million in relief for communities of color that have been the victims of lending discrimination across the country.