Why Haven’t Loan Officers Been Told These Facts?

First Redlining Settlement Agreement Against Credit Union in Justice Department History

The Justice Department announced today that Citadel Federal Credit Union (Citadel) has agreed to pay over $6.5 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by redlining predominantly Black and Hispanic neighborhoods in and around Philadelphia. This landmark agreement is the Justice Department’s first redlining settlement with a credit union, making this a historic achievement for the Combating Redlining Initiative.

Redlining is an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color or national origin of residents in those communities.

“This redlining settlement marks the Justice Department’s very first resolution involving a credit union, making clear our intent to hold all types of lenders accountable for their role in modern-day redlining,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “There are well over 4,600 credit unions across America, all subject to federal laws that prohibit redlining and lending discrimination. Redlining and other forms of lending discrimination harm communities of color and families by denying them an equal opportunity to access credit, attain the dream of homeownership and build generational wealth. This settlement will expand investment in Black and Hispanic communities, particularly in Philadelphia, and increase opportunities for homeownership and financial stability. Residents of communities harmed by unlawful redlining will finally be able to access credit services from Citadel in their own neighborhoods, including at the new branches required by the settlement.”

“For generations, Philadelphia’s communities of color have lacked equal access to the credit needed for homeownership. We know that redlining has a devastating impact on a family’s finances and future, and results in economic and other inequalities that plague our communities for decades,” said U.S. Attorney Jacqueline C. Romero for the Eastern District of Pennsylvania. “We also know the transformational change that can occur when credit is made available to underserved residents, particularly when lenders, like Citadel, establish branch locations in these neighborhoods.”

The Justice Department’s complaint, which was filed today in the Eastern District of Pennsylvania, alleges that, from at least 2017 through 2021, Citadel failed to provide mortgage lending services to majority-Black and Hispanic neighborhoods in and around Philadelphia and discouraged people seeking credit in those communities from obtaining home loans. Citadel’s home mortgage lending was focused disproportionately on white areas around Greater Philadelphia. Peer lenders generated mortgage applications in predominately Black and Hispanic neighborhoods at nearly three times the rate of Citadel and originated mortgage loans in these areas at more than three times the rate of Citadel.

The complaint further alleges that Citadel’s branches are located almost exclusively in majority-White neighborhoods, with no branches in Philadelphia, which contains more than 75% of the majority-Black and Hispanic neighborhoods and 34% of the total population in Citadel’s market area.

Under the proposed consent order, which is subject to court approval, Citadel has agreed to invest $6.52 million to increase credit opportunities for communities of color in and around Philadelphia. Specifically, Citadel will:

  • Invest at least $6 million in a loan subsidy fund to increase access to home mortgage, home improvement and home refinance loans for residents of majority-Black and Hispanic neighborhoods in Philadelphia;
  • Spend at least $250,000 on community partnerships to provide services related to credit, consumer financial education, homeownership and foreclosure prevention for residents of predominantly Black and Hispanic neighborhoods in Citadel’s market area;
  • Spend at least $270,000 for advertising, outreach, consumer financial education and credit counseling focused on predominantly Black and Hispanic neighborhoods in Philadelphia;
  • Open three new branches in predominantly Black and Hispanic neighborhoods in Philadelphia; and
  • Hire a community lending officer who will oversee the continued development of lending in communities of color.

Citadel also agreed to retain independent consultants to enhance its fair lending program and better meet the communities’ needs for mortgage credit. The credit union will conduct a community credit needs assessment, evaluate its fair lending compliance management systems, and conduct staff trainings.

With assets of approximately $6 billion, Citadel is headquartered in Pennsylvania and operates 24 branches in its market area of Greater Philadelphia, which includes Bucks, Chester, Delaware, Lancaster, Montgomery and Philadelphia Counties. Citadel is the second largest credit union in the region and has over 263,000 members. Citadel cooperated with the Justice Department’s investigation.

In October 2021, Attorney General Merrick B. Garland and Assistant Attorney General Clarke launched the Justice Department’s Combating Redlining Initiative, a coordinated enforcement effort to address this persistent form of discrimination against communities of color. Since 2021, the department has announced 14 redlining resolutions and secured over $144 million in relief for communities of color that have been the victims of lending discrimination across the country. In March, Assistant Attorney General Clarke presented remarks to America’s Credit Unions’ Governmental Affairs Conference regarding the unique issues raised by redlining in the credit union industry.

Citadel’s Response:

EXTON, Pa., October 10, 2024 – Citadel Credit Union today announced that it has entered into a settlement with the U.S. Department of Justice (DOJ). This agreement marks a pivotal moment in Citadel’s journey, embracing the opportunity to reinforce its dedication to community and demonstrate its strong aspiration to ensure access to credit and financial services for every member of the communities it serves.

Citadel Credit Union President & CEO, Bill Brown commented: “As we look back at our history, this is a situation arising from what we weren’t doing, rather than one of intentional acts. Banking has not been immune to the digital disruption that has swept across various industries for decades and Citadel’s robust focus on our digital journey shifted our strategy away from new brick-and-mortar branches in recent years, which inadvertently impacted our ability to serve our region as broadly as we had planned. Philadelphia has always been, and remains, part of our growth plan, but the evolution of our business model led to us falling short of opening branches in Philadelphia as we had agreed to do when we expanded our charter.

While Citadel respectfully disagrees with the allegations regarding our lending practices, we view this settlement as a vital opportunity to enhance our commitment to proactive community engagement. We acknowledge that our efforts did not allow us to reach majority Black and Hispanic census tracts in Philadelphia. This settlement marks a significant milestone in our ongoing journey towards creating a more inclusive and equitable future for all communities in our service area. Our decision to resolve this matter reflects our dedication to focusing on the future and continuing to make a positive impact in all communities we serve. We remain committed to fulfilling our promises to Build Strength Together.”

Under the terms of the settlement, among other things, Citadel has committed to:

  • Provide $6 million in mortgage loan subsidies over a 5-year period for majority Black and Hispanic census tracts in Philadelphia County;
  • $270,000 in additional focused marketing, advertising, consumer financial education and outreach;
  • $250,000 in community development partnerships;
  • Open 3 full-service branches in Philadelphia County within three years

Citadel President & CEO, Bill Brown, continued, “We intend to lean into the responsibility that comes with our growth and live up to our promise to help every community in our service area live their brightest future by inspiring them with guidance and tools to build financial strength. To demonstrate our commitment, we are proud to initiate new programs and expand existing ones to fulfill our promise to our members and communities.”

Key initiatives Citadel is proud to announce today include:

  • Increasing its commitment to its philanthropic legacy through the appointment of a Vice President in a new role dedicated to Philanthropy and Community Engagement demonstrating its commitment to a purpose-built Citadel Cares program. The program, which was announced in July 2023, has been thoughtfully re-vamped to ensure continued alignment with Citadel values with refined new pillars:
    • Financial Literacy – focused on supporting financial education programs throughout our charter area.
    • Education – focused on partnering with programs who prepare students to thrive in the classroom.
    • Community & Economic Development – focused on strengthening the economic vitality in the regions through programs that support homeownership & housing, veteran, women and minority owned businesses.
    • Health & Wellness – focused on partnering with organizations that provide access to quality food and medical care for those in need.
  • The appointment of a Community Lending Officer this past August to identify, develop and build relationships to serve as a source for mortgage lending opportunities in majority-Black and Hispanic census tracts with a focus on Philadelphia.
  • Citadel is working to form new partnerships with organizations aligned with its values to further demonstrate its dedication to members and communities across Southeastern Pennsylvania, as it begins to replicate its philanthropic efforts that stemmed from its local roots to those it has demonstrated through its significant support in the fight against childhood cancer as well as various financial education events.
  • Citadel is also proudly nearing launch of a Citadel Home Help Program designed to provide affordable products for prospective homebuyers in low to moderate income (LMI) census tracts.

Over the course of the past year since Brown joined Citadel, a new Senior Leadership Team has been assembled and is aligned on priorities and Citadel’s future trajectory. Citadel Credit Union remains dedicated to living out its values of Innovation, Opportunity, Connection, Transparency, Security, and Respect in all it does. Citadel is proud of its history of giving and commitment to corporate responsibility, having supported dozens of organizations through over $500,000 in donations and thousands of volunteer hours of support annually, while also regularly offering community seminars and other financial wellness opportunities across its footprint. Nearly 25 years ago, Citadel created the Citadel Heart of Learning Awards program, which honors local teachers throughout its service area, and recently surpassed a milestone of $500,000 granted to deserving educators. With a name that promises a “fortress”, or a place where people can turn to gain strength for a better future, Citadel looks forward to expanding its membership, helping to build better futures for all.

 

 

BEHIND THE SCENES – New FHA 2025 Nationwide Forward Mortgage Loan Limits

The provisions for loan limits are effective for case numbers assigned on or after January 1, 2025.

(B) Low-Cost Area

The FHA national low-cost area mortgage limits, which are set at 65 percent of the national conforming limit of $806,500 for a one-unit Property, are, by
property unit number, as follows:

  • One-unit: $524,225
  • Two-unit: $671,200
  • Three-unit: $811,275
  • Four-unit: $1,008,300

(C) High-Cost Area

The FHA national high-cost area mortgage limits, which are set at 150 percent of the national conforming limit of $806,500 for a one-unit Property, are, by property unit number, as follows:

  • One-unit: $1,209,750
  • Two-unit: $1,548,975
  • Three-unit: $1,872,225
  • Four-unit: $2,326,875

Mortgage limits for the special exception areas of Alaska (AK), Hawaii (HI), Guam (GU), and the Virgin Islands (VI) are adjusted by FHA toaccount for higher costs of construction. These four special exception areas have a higher ceiling as follows:

  • One-unit: $1,814,625
  • Two-unit: $2,323,450
  • Three-unit: $2,808,325
  • Four-unit: $3,490,300

HECMs

For the period of January 1, 2025, through December 31, 2025, the HECM
MCA will be $1,209,750 (150 percent of Federal Home Loan Mortgage
Corporation’s (Freddie Mac) national conforming limit of $806,500).
The MCA of $1,209,750 is also applicable to the special exception areas:
Alaska, Hawaii, Guam, and the Virgin Islands.

See the details at the HUD link below.
FHA Mortgagee Letter 2024-21

FHA Mortgagee Letter 2024-22 HECM

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